Colombian Airline Avianca Plans to Shed $3 Billion in Debt

Colombian airline Avianca Holdings S.A. filed a Chapter 11 reorganization plan that would convert its secured debt to equity and preserve the business, saving over 10,000 jobs and employee pensions.

The plan would eliminate about $3 billion of debt from the company’s balance sheet, according to a plan disclosure statement filed Tuesday in the U.S. Bankruptcy Court for the Southern District of New York.

Under the plan, holders of a second tranche of post-bankruptcy debtor-in-possession loans would get at least 72% of the equity in a new entity emerging from the bankruptcy.

Some of those Tranche B lenders, including Avianca’s ...