Brazilian airline Azul (AZUL.N) has successfully reached a critical agreement with its bondholders to secure additional financing of up to $500 million, marking a significant step in its ongoing restructuring efforts aimed at alleviating market concerns over its debt. This development comes as the airline seeks to strengthen its financial position and avoid the pitfalls that have plagued several Latin American carriers in the wake of the COVID-19 pandemic.
Azul’s stock surged over 10% on the São Paulo stock exchange following the announcement, positioning it as one of the top gainers in Brazil’s benchmark Bovespa index, which rose by 0.8%. The deal has been widely viewed as a positive indicator, particularly as it mitigates fears of a potential Chapter 11 filing. Analysts at Bradesco BBI noted that the terms of the agreement could lead to a favourable market reaction.
As part of the deal, Azul is set to receive $150 million this week, with an additional $250 million expected by year-end. This financing is critical to Azul’s recently established arrangement with its lessors to eliminate nearly $550 million in obligations in exchange for a 20% equity stake in the airline.
Chief Executive John Rodgerson highlighted that the deal not only provides immediate liquidity but also opens the door for a quick deleveraging of the company. Azul aims to enhance its cash flow by negotiating reduced costs, which could include a potential debt-for-equity swap worth up to $800 million if its cash flow improves.
The airline has made significant strides in renegotiating its commitments, successfully addressing 98% of its obligations with lessors and manufacturers. With these developments, Azul is positioning itself for a more resilient future in Brazil’s competitive airline industry.
