Azul's Capital Structure Enhancement: Extension of Exchange Offer and Introduction of Superpriority Notes

Azul S.A., the largest airline in Brazil by number of cities served and departures, has extended the expiration deadline for its previously announced exchange offer in respect of Existing 2028 First Out Notes for New Notes and solicitation of consents to proposed amendments to the Existing Indenture. This strategic move aims to strengthen Azul's capital structure and enhance its financial flexibility. The extension of the exchange offer deadline to January 21, 2025, at 5:00 p.m., New York City time, provides additional flexibility for eligible holders who have not yet tendered their Existing Notes to participate in the Exchange Offer.

As of the original deadline, 99.69% of the total outstanding principal amount of the Existing Notes had been validly tendered for exchange and not validly withdrawn, satisfying the Minimum Exchange Condition of 66.67%. This high participation rate indicates strong creditor support for Azul's restructuring plan. The extension allows more time for eligible holders to tender their notes, potentially increasing the overall participation rate and further strengthening Azul's capital structure.

The extension also provides Azul with more time to finalize the necessary amendments to the indenture structure and complete the issuance of at least $500 million in Superpriority Notes, which are subject to the terms and conditions of the Exchange Offer. The successful achievement of the 95.48% participation in Second Out Notes Exchange Offers (exceeding the 95% requirement) significantly de-risks the overall restructuring process.

The introduction of Superpriority Notes in Azul's capital structure has several potential market implications. First, it can help Azul improve its capital structure by providing additional liquidity and reducing refinancing risks. Second, it can enhance Azul's financial flexibility, allowing it to manage its liabilities more effectively. Third, it can potentially reduce refinancing risks by providing a more diversified capital structure. Fourth, it can help maintain market liquidity and trading efficiency by ensuring that Azul's bonds remain attractive to investors. Finally, the successful completion of the debt restructuring initiative, including the issuance of Superpriority Notes, could potentially lead to an upgrade in Azul's credit ratings, demonstrating strong creditor support and improving Azul's debt maturity profile.



In conclusion, the extension of the exchange offer deadline and the introduction of Superpriority Notes in Azul's capital structure are strategic moves aimed at strengthening Azul's capital structure and enhancing its financial flexibility. These initiatives, combined with the high participation rate in the exchange offers, should help Azul navigate the challenges of the aviation industry and maintain its position as the largest airline in Brazil.