Azul secures $525 million through superpriority notes

Azul S.A. (B3: AZUL4, NYSE: AZUL), a leading airline based in Brazil, has successfully closed an offering of $525 million in Floating Rate Superpriority Notes due 2030. This financial maneuver is part of a broader restructuring plan aimed at improving the company’s short-term cash flow by over $150 million, with additional enhancements of over $300 million expected across 2025 to 2027.

According to InvestingPro data, the company currently faces significant financial challenges with a current ratio of 0.27 and total debt of $5.8 billion, though analysis suggests the stock may be undervalued at current levels.

The issuance of the Superpriority Notes, conducted by Azul Secured Finance LLP, was complemented by the settlement of exchange offers and consent solicitations, as detailed in a recent Material Fact. The completion of this offering was contingent on Azul reaching agreements with lessors, OEMs, and other suppliers, which allowed the company to access the full proceeds from the notes, including a $100 million portion that was previously conditional.

The Superpriority Notes, guaranteed by Azul and its subsidiaries, are secured by a collateral package that takes precedence over certain other debts and obligations of the company. These notes were offered to a select group of noteholders and holders of convertible debentures, who had agreed to support Azul’s financial restructuring.

In addition to the Superpriority Notes, Azul has also issued new Senior Secured Notes due in 2028, 2029, and 2030, totaling over $1.8 billion in principal amount. These New Exchange Notes are backed by the same guarantors and are secured according to an intercreditor agreement that establishes their payment priorities.

With annual revenue of $3.47 billion and EBITDA of $231.56 million in the last twelve months, this restructuring is crucial for the company’s financial health. InvestingPro subscribers can access detailed financial health scores and 11 additional ProTips that provide deeper insights into Azul’s financial position.

Furthermore, Azul has amended the terms of its Existing Notes, eliminating most restrictive covenants and events of default, and releasing the collateral that was securing these notes. This amendment was facilitated by the consent of the Existing Notes’ holders.

A key element of the restructuring plan includes the mandatory partial equitization of the New Exchange Notes into preferred shares, which must occur no later than April 30, 2025. This will convert 35% of the principal amount of the New Exchange Notes, with an additional 12.5% equitized upon the completion of an equity offering that raises at least $200 million.

Azul’s shareholders have also entered into a Shareholder Support Agreement, which aligns with the company’s governance arrangements and supports the restructuring plan.

This strategic financial restructuring is designed to bolster Azul’s liquidity and operational flexibility as it navigates the competitive airline industry. With a market capitalization of $264.23 million and significant debt obligations, the success of this restructuring is crucial for the company’s future. For comprehensive analysis of Azul’s financial position and growth prospects, investors can access the detailed Pro Research Report available on InvestingPro, which provides expert insights and actionable intelligence for informed investment decisions. The company’s latest movements are based on a press release statement and do not constitute an offer to buy or sell securities or a solicitation of consents in any jurisdiction where such activities would be unlawful. Azul emphasizes that the offering of any securities has not been registered under the U.S. Securities Act of 1933 and will not be offered or sold in Brazil in a manner that would constitute a public offering under Brazilian law.

In other recent news, Brazilian airline Azul S.A. has completed a significant debt restructuring, eliminating nearly $1.6 billion from its balance sheet and raising $525 million in new funds. This restructuring has resulted in a decrease in the company’s financial leverage, dropping its net debt to EBITDA ratio from 4.8 to 3.4. The company also reported high participation in its exchange offers for three series of secured notes.

In addition to its financial restructuring, Azul is considering a merger with competitor airline Gol, contingent on regulatory approvals and the successful conclusion of Gol’s Chapter 11 reorganization plan. This news comes alongside an upgrade from Seaport Global Securities analyst Daniel McKenzie from Neutral to Buy, signaling a more optimistic outlook for the company’s financial future.

Azul’s Chief Executive, John Rodgerson, has also shared that the airline anticipates receiving 15 new Embraer’s E2 jets during the year.

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