SAO PAULO, Sept 13 (Askume) – Brazilian airline Azul Airlines (AZUL.N)
Since August, there have been media reports that Azul is considering filing for bankruptcy protection under Chapter 11 of the US Bankruptcy Code to deal with its debt burden. The company’s stock price has fallen by more than 40% since August. The company said its focus is on direct negotiations with lenders.
“Momentum is building toward a successful completion of the out-of-court restructuring,” one source said, adding that Azul and the lessor had met in New York in recent weeks.
Azul declined to comment on the negotiations.
The airline told Askume last month that Azul would not consider Chapter 11 and would offer equity to lessors to resolve obligations it planned to pay within three years.
While several Latin American airlines have filed for bankruptcy in the wake of the COVID-19 pandemic, including Aeromexico, Avianca, LATAM (LTM.SN) and, most recently, local rival Gol (GOLL4.SA), the Brazilian airline has managed to avoid Chapter 11 .
Most of Azul’s lessors have said they would agree to the plans on the table, said the sources, who requested anonymity to discuss confidential talks. Two of them said the deal could be signed within a matter of weeks.
Under the current structure, the lessee would receive about 20% of Azul’s equity, one source said.
“It’s not 100 percent what Azul wants, and it’s not 100 percent what lessors want, but it could be a good way to ease that burden,” a person familiar with the matter said.
Azul struck a deal with lessors and equipment manufacturers to offer them up to $570 million in preferred shares worth 36 reais ($6.46) per share due in 2023, part of a broader restructuring that also delayed debt maturities and raised additional capital.
Azul’s shares have fallen more than 70% so far this year and are currently trading at around 4 reais as the company struggles with a weak exchange rate and devastating flooding in the main market of Porto Alegre , creating the need for another restructuring.
The new agreement with the lessors will also open the door to raising fresh funds from bondholders, sources said.
The company previously said it could use its freight unit Azul Cargo as collateral for up to $800 million. Azul could aim to raise $300 million to $400 million in a new deal, one of the sources said.
Azul is also in talks with Gol’s parent company Abra Group to “explore opportunities”, amid speculation of a possible tie-up. The two airlines haveA codeshare agreement was announced in May.
(1 USD = 5.5702 R$)
