Brazilian airline Azul reaches payment deal of tradeable note and equity with aircraft lessors.

Azul S.A.has announced that it has successfully reached commercial agreements with lessors that represent more than 90% of its lease obligations, subject to certain conditions and applicable corporate approvals.

These agreements represent a significant part of a comprehensive plan designed to strengthen Azul’s cash generation and improve its capital structure, and also deliver to lessors 100% of the prior-committed values through a combination of long-term debt and equity valued at a reset balance sheet.

Under these agreements, lessors will reduce Azul’s lease payments to eliminate Covid-related deferrals as well as the gap between Azul’s contractual lease rates and agreed-upon current market rates.

Azul S.A., the largest airline in Brazil by number of flight departures and cities served, offers 1,000 daily flights to over 160 destinations. With an operating fleet of over 170 aircraft and more than 13,000 Crewmembers, the Company has a network of 300 non-stop routes as of December 2022.

• Azul said the deal included lessors eliminating payment deferrals dating back to the COVID-19 pandemic as well as the gap between its contractual lease rates and current market rates.
• The airline will issue a tradeable note due in 2030 and equity to the lessors that is priced to reflect its improved cash generation, capital structure and reduced credit risk.

In exchange, lessors will receive a tradeable note maturing in 2030 and equity priced in a way to reflect Azul’s new cash generation, improved capital structure, and reduced credit risk.

Alex Malfitani, Azul’s CFO, said in a statement,

“Lessors represent 80% of our nominal gross debt. Reaching these agreements demonstrates tremendous success in our approach. The leasing community has recognized that supporting Azul is an intelligent, revenuemaximizing business decision, yet we are still honored and grateful for their valuable support. "

"No aircraft have left the fleet throughout this negotiation, and in fact our partners have delivered 12 additional new aircraft to us over the past five months. Negotiations continue with lessors and other stakeholders such as OEMs, and we are very optimistic about reaching agreements with all of them,”

In a separate development, Long Focus Capital Management LLC grew its position in Azul S.A. by 11.0% during the third quarter, according to the company in its most recent disclosure with the Securities & Exchange Commission. The firm owned 905,000 shares of the company's stock after purchasing an additional 90,000 shares during the quarter.