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Last Trade - 08/05/20

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Industrials
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Market Cap £n/a
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EXCLUSIVE-Elliott Management opposes airline Azul on Avianca Brasil bankruptcy plan

Mon 20th May, 2019 8:03pm
By Marcelo Rochabrun
    SAO PAULO, May 20 (Reuters) - U.S. hedge fund Elliott
Management is opposing a new plan by Brazilian airline Azul SA
 AZUL.N  to purchase some of the routes operated by financially
troubled rival Avianca Brasil for $145 million, according to a
legal document seen by Reuters. 
    Elliott, known in Latin America for forcing Argentina into
bigger repayments on defaulted bonds, is Avianca Brasil's
largest creditor by a wide margin, with claims totaling almost
$490 million. 
    Avianca Brasil filed for bankruptcy protection in December,
setting off a dispute for its routes among Brazil's top three
airlines.  urn:newsml:reuters.com:*:nL1N1YI0SU The fight underscores how the routes of
Avianca Brasil, which is controlled by the same holding company
as publicly traded Colombia-based Avianca Holdings SA
 AVT_p.CN , have become fiercely sought after despite the
financial woes that sent it into bankruptcy protection. 
    Behind the scenes, Elliott has used its dominance as a
creditor to influence the dispute over the routes. Legal
documents show that Elliott crafted the current bankruptcy
reorganization plan, which Azul has countered with its own new
proposal this month. 
    Although the final verdict is in the hands of a judge, the
hedge fund is asking the court to dismiss Azul's proposal and
keep its own plan intact, which would benefit Azul's two larger
Brazilian rivals: Gol Linhas Aereas Inteligentes SA  GOLL4.SA 
and LATAM Airlines Group  LTM.SN . Gol and LATAM have signed
agreements with Elliott to pay the hedge fund a combined $70
million. 
    Elliott's influence in the bankruptcy process has raised
questions among creditors regarding the origin of its loans,
including by airport handling operator Swissport International
AG  IPO-SWPO.S , which Elliott now accuses of working to further
Azul's agenda. 
    Documents show Elliott has not lent money directly to
Avianca Brasil, but instead to companies controlled by the same
holding group, including a palm oil field in Colombia and a
shipyard based in Rio de Janeiro. 
    While Azul has previously accused Elliott of engaging in
"spurious" deals meant to harm the competing airline's business,
the hedge fund said in response that Azul's claims were "clumsy
- typical of someone frustrated with their own failure." 
    Avianca Brasil itself has yet to weigh in on Azul's plan and
declined to comment on Monday. 
    A union representing some of its aircraft workers, however,
has endorsed Azul's plan as superior to Elliott's. The union
carried out a strike over the weekend alleging that the airline
has fallen behind in its payroll. 
    Azul said in a statement on Monday that its plan offers
Avianca Brasil's workers, clients and creditors a "superior
option" to Elliott. 
    "Elliott is against Azul's proposal because the hedge fund
has already received payment, contrary to the thousands of
workers of Avianca Brasil."
    Gol also opposes Azul's plan. LATAM has yet to give an
opinion. 
    
    TRADING ACCUSATIONS
    Azul first made an offer to buy Avianca Brasil's routes back
in March, offering $105 million and signing a tentative deal
with the carrier.  urn:newsml:reuters.com:*:nL1N20Y08O In particular, it wanted to break
in to the lucrative Sao Paulo to Rio de Janeiro air shuttle
business. 
    But after Azul closed the preliminary deal, Elliott
contacted rivals Gol and LATAM and obtained higher bids from
them totalling $140 million.
    At a creditors meeting in April, Elliott's plan was approved
and a bankruptcy auction was scheduled, sidelining Azul. 
    Earlier this month, Azul upped its bid to $145 million and
asked a judge to approve its plan over Elliott's. That decision
is still pending. 
    The Elliott-Azul dispute has pulled in a third company,
airport handling operator Swissport, which recently obtained an
injunction that suspended the bankruptcy auction at the eleventh
hour. 
    Elliott said in its legal filing that Azul and Swissport
International worked "in apparent coordination" to undermine the
hedge fund and other creditors.
    Swissport did not respond to a request for comment.
 ($1 = 4.1012 reais)

 (Reporting by Marcelo Rochabrun in Sao Paulo
Editing by Christian Plumb and Matthew Lewis)
 ((marcelo.rochabrun@thomsonreuters.com
+55 11 5644 7768;))
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