Azul initiates Chapter 11 proceedings, enters restructuring support agreements

Azul (AZUL) announced it has entered into restructuring support agreements with its key financial stakeholders, including its existing bondholders; largest lessor, AerCap (AER), representing the majority of the company’s aircraft lease liability; and strategic partners, United Airlines (UAL) and American Airlines (AAL), to effectuate a reorganization process. To implement the agreements, which include a commitment of approximately $1.6B in financing throughout the process, elimination of over $2B of debt and contemplate further equity financing of up to $950M upon emergence, Azul is using the Chapter 11 process in the United States. Azul will continue flying and operating as normal while maintaining its commitments throughout this process. Azul intends to use this legal framework to eliminate over $2B in total funded debt, reduce lease obligations, and optimize its fleet. Azul’s enters the process with agreements with many of its main stakeholders already in place. Azul has secured a commitment for debtor-in-possession financing of approximately $1.6B from certain key financial partners, which will repay part of the company’s existing debt and provide the company with approximately $670M of new capital to bolster liquidity during the restructuring process. Upon emergence, the agreements provide for the DIP financing to be repaid with the proceeds of an equity rights offering of up to $650M, backstopped by some of these financial partners and further supported by a contemplated additional equity investment of up to $300M from United Airlines and American Airlines, subject to the satisfaction of certain conditions.