Avianca Holdings S.A. minority shareholder Kingsland Holdings Limited has announced that it will seek to have an independent auditor appointed to examine numerous related party transactions that Avianca has entered into with its controlling shareholder, Synergy Aerospace, and other entities affiliated with Synergy and its owner, Germán Efromovich.
Kingsland Holdings is the parent firm of TACA International Airlines (San Salvador International), an El Salvador-based Central American airline that was merged with Avianca in 2010. It now owns 21.9% of the merged entity, Avianca Holdings S.A. (formerly AviancaTaca Holding S.A.), with Synergy controlling over 50%.
Kingsland Holdings said in a statement that under Avianca’s articles of association, Avianca (Bogotá) must call an extraordinary shareholders meeting within the next ten days.
"In light of the many related party transactions that Efromovich has caused, and is continuing to cause, Avianca to enter into with his affiliates, and the apparent one-sided nature of such transactions that favor Synergy at the expense of Avianca’s other shareholders, Roberto Kriete, Kingsland’s representative on Avianca’s board of directors, has been requesting for several months that Avianca retain an independent auditor to review such transactions," it said.
Kingsland claims Synergy has used its control of Avianca to over-rule these requests, leaving it no choice "but to take all actions necessary to protect the interests of Avianca’s minority shareholders".
Kingsland warned that in the event that, at the extraordinary shareholders meeting, Synergy uses its controlling position in Avianca’s voting shares to deny an impartial review of its related party transactions with Avianca, it intends to request that a civil court in Panama appoint independent auditors to review such transactions pursuant to Article 425 of the Commercial Code of Panama.
The motion follows Kingsland's decision on February 28, 2017, to file a lawsuit in a New York State Court challenging Synergy’s and Efromovich’s decision to pursue a strategic alliance with United Airlines (UA, Chicago O'Hare) parent, United Continental Holdings.
There, Kingsland contends that Efromovich conducted negotiations in secret and that the other offers from Copa Airlines (CM, Panamá City Tocumen International) and Delta Air Lines (DL, Atlanta Hartsfield Jackson) were more lucrative than United's. Kingsland also claims that, as per Avianca Holdings' articles of association, it has the right to veto any major decision in regards to the management of the company and its finances, but says that Efromovich deliberately handled negotiations in such a way as to shut out and mislead other shareholders.
Although Avianca has acknowledged the lawsuit, it has insisted it will continue its discussions with United Airlines and believes the lawsuit will not affect its growth plans.
