By Gabriel Araujo
SAO PAULO (Reuters) – Azul has reached a deal with its existing group of bondholders to obtain additional financing, the Brazilian airline said on Monday, as part of restructuring it expects to ease market concerns about its high debt load.
Azul dominates Brazil’s airline industry along with LATAM and Gol, and has managed to avoid the fate of a number of Latin American carriers who have filed for bankruptcy after the COVID-19 pandemic, including its two main rivals.
The fresh capital was a condition of Azul’s recent deal with lessors to scrap nearly $550 million in obligations in exchange for an equity stake, which analysts see as fundamental to strengthen the airline’s cash position.
Under the deal with bondholders, the carrier said in a securities filing that Azul will receive $150 million this week and another $250 million by year-end in fresh debt, totaling the $400 million it had been targeting.
The agreement, Azul added, may include another $100 million in financing and a potential debt-for-equity swap of as much as $800 million if the company manages to further improve its cash flow by reducing costs by around $100 million per year.
“It will allow for a quick deleveraging of Azul,” Chief Executive John Rodgerson said in an interview. “They say, ‘we are creditors but want to be equity holders if we have this cost reduction’. It is an option, but I’m confident we’ll take it.”
Reuters reported last week, citing sources, that Azul was in talks with multiple parties to raise about $400 million in fresh capital via debt financing and that an agreement was near.
(Reporting by Gabriel Araujo; editing by Jason Neely)