BOGOTA (Reuters) – A Colombian court has ordered government loans worth $ 370 million to Avianca Holdings under U.S. Chapter 11 bankruptcy laws to be temporarily suspended, until the airline guarantee that she will be able to refund the money.

In late August, the finance ministry said the government would support the restructuring of Colombia’s flagship airline with the loan, sparking controversy with critics saying repayment guarantees were not enough.

Amid the uproar, legal action was taken to the Cundinamarca Administrative Court asking for the suspension of the loan.

The court ruled that the Colombian government should not grant the loan to Avianca until the company presented sufficient guarantees that it would be able to repay the loan.

There was no immediate response from the government, which had previously defended its decision to issue the loan, or from Avianca about Friday night’s decision.

Avianca, which has entered a restructuring process under Chapter 11 of US bankruptcy laws amid the coronavirus pandemic, has started domestic flights in the Andean country and hopes to gradually restart its international operations this month.

In mid-August, Avianca Holdings, Latin America’s second-largest airline, launched a plan to raise $ 1.2 billion in new funds – not including loan repayments – as part of the restructuring process.

The plan, which includes the Colombian government’s $ 370 million loan, must be assessed and cleared by a judge overseeing the case in the Southern District of New York.

Avianca has a fleet of 158 aircraft with 19,000 employees and serves 76 destinations in 27 countries in America and Europe.

Reporting by Luis Jaime Acosta; Writing by Oliver Griffin; edited by Diane Craft

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