Relevant Documents:ReleaseComplaint
Avianca Holdings filed a complaint against its second-largest shareholder, Kingsland Holdings Ltd., and board member Roberto Kriete today in New York State Supreme Court “to stop their improper actions aimed at blocking Avianca’s progress.” The company also filed a motion to dismiss earlier allegations made in a
lawsuit by Kingsland accusing Avianca of negotiating a deal with United Airlines at the expense of other shareholders and pledging shares of the company to third parties inappropriately.
The Colombian company asked the court to issue orders to prevent the dissemination of nonpublic information and to dismiss Kingsland’s “meritless lawsuit.”
The complaint filed today by Avianca “concerns a disloyal director who has worked actively to undermine the Company’s strategic goals, all for his own selfish purposes,” writes Avianca of Kriete in its complaint. The director, through his company Kingsland and “others working at his direction,” has leaked confidential discussions from Avianca’s board of directors meetings “and spread misinformation to obstruct Avianca’s negotiations with third parties,” says the complaint. Additionally, he has worked to pressure United into abandoning negotiations with Avianca as he “perceives that a deal with United would serve neither his narrow self-interest nor his other personal and conflicting ventures in the aviation industry.”
According to the complaint, Kriete, through Kingsland, is one of two holders of common stock in Avianca and a minority stockholder who holds 21.9% of its voting stock.
Avianca writes that Kriete seeks to force Avianca away from a partnership with United and into an “alternative sale transaction” wherein Kriete would profit over his shares or work with other partners to take control of Avianca. The company accused the director of serving on the airline’s board while also acting as a director of Volaris Air, whose subsidiary in Costa Rica is a competitor to Avianca in several Central American countries.
“Notwithstanding that his interests conflict with those of Avianca and its other stakeholders, Kriete has refused to step down from Avianca’s board. Instead, Kriete has insisted on remaining a director of Avianca, enjoying privileged access to the Company’s confidential information, which he has misused for his own gain,“ the complaint reads. The Kingsland complaint, according to Avianca, “reveals and often misrepresents nonpublic, confidential information about the company related to the ongoing Strategic Process and also other transactions and board discussions.” The disclosure of such information “has and will continue to cause the Company irreparable harm.”
With respect to the shareholder agreement, broadly known as the Joint Action Agreement, or the JAA, the complaint notes that Kingsland would have the right to reject or disapprove of a transaction with United “if and when those transactions were presented to Avianca’s board for consideration or approval.” The agreement provides for Synergy Aerospace, owner of 78.1% of Avianca’s voting stock, with the option to purchase 100 million shares in Avianca, or approximately two-thirds of Kingsland’s exposure to the airliner, at approximately 10% above market price.
“While Kingsland agreed to the negotiated price reflected in the JAA, it now seeks to evade the JAA’s unequivocal terms by pursuing illegitimate actions in the hope of extracting a higher price.” The company has “explicitly breached” the JAA and engaged in a “heavy-handed attempt” to use the courts to gain greater rights than stated in the shareholder agreement, Avianca said in its release.
The “disloyal conduct” on the part of Kriete has caused Kingsland to violate the JAA, as Section 7.03 of the shareholder agreement requires that each party consent before any party can make “
any” public statements regarding the JAA, the complaint reads. The “misconduct,” however, does not “end there.” Kriete and Kingsland have taken other steps to aggravate Avianca’s business, the complaint notes. They have disapproved of directors that “have faithfully served Avianca for years” and held “hostage” a highly sensitive board presentation that Kriete obtained improperly, the complaint reads.
Thus, Avianca has sought injunctive relief to prevent Kingsland from further obtaining and publicizing the company’s confidential information and enjoin the shareholder from releasing false and misleading statements. The company has asked the court to obligate Kingsland to follow the dispute resolution of their shareholder agreement and to force Kingsland’s representatives to stop interfering with the shareholder agreement. Avianca also asks the court to issue an order to dismiss Kingsland’s “meritless lawsuit.”
A hearing to show cause in the Kingsland litigation has been scheduled for April 6 at 2:30 p.m. EDT in front of New York State Supreme Court Judge Anil C. Singh at 60 Centre Street, Room 218, New York.