Avianca Holdings will, in the next few days, present information to the Administrative Court of Cundinamarca showing that the Colombian government's planned extension of debtor-in-possession (DIP) financing of up to USD370 million to the ailing firm is in the national interest.

At the time the loan was first announced, in late August, the government said it had been authorised by the administrative committee of the country's emergency fund but would first have to be evaluated and authorised by a judge overseeing Avianca Holdings' Chapter 11 bankruptcy proceedings in New York. If accepted, the facility will mature in November 2021. Aside from the Colombian state, the DIP financing is supported by the company's existing lenders and by more than 90 additional third-party institutional investors.

However, last week, the court in Cundinamarca sided with Colombian citizen Jonatan Ruiz who took the Colombian Ministry of Finance, the presidency, and the airline to task over its participation in the loan claiming that none of the parties involved had presented neither the terms and conditions of the loan nor the guarantees that Avianca would put down to secure it. As such, he demanded the court force the airline provide “real, material and above all valuable” guarantees to back the loan, a motion it agreed with.

In its response to the court ruling, Avianca Holdings said it would present the required information in the coming days adding that it will demonstrate that government's participation in the DIP financing scheme will be beneficial to Colombia as a whole.

"The transaction has been structured in a way that provides substantial collateral support as well as attractive economic returns to the Republic that are equal to those of other senior secured private institutional investors, and ahead of certain other key stakeholders and third-party lenders in a USD700 million subordinated loan," it said.

"We expect to file our DIP motion with the US Bankruptcy Court in the coming week and are confident that the Colombian courts will authorize the Colombian government to move forward with funding in a timely manner."

The Finance Ministry and the other defendants have 10 days to respond to the motion.