Azul Receives Court Approval for Chapter 11 Restructuring Plan

Azul received court approval to move forward with its Chapter 11 transformation process, gaining access to $250M of its $1.6B debtor-in-possession financing. The company's CEO, John Rodgerson, stated that the approvals, along with support from key stakeholders, enable Azul to continue its transformation plan and reduce leverage.

Azul S.A. has received court approval to proceed with its Chapter 11 transformation process, gaining access to $250 million of its $1.6 billion debtor-in-possession financing. This development marks a significant milestone in Azul's restructuring efforts, which aim to reduce leverage and position the airline for long-term success.

The court approval allows Azul to continue its transformation plan, which includes eliminating over $2.0 billion in debt and optimizing its fleet. The company has secured approximately $1.6 billion in financing through debtor-in-possession arrangements, which will enable it to maintain regular operations while addressing debt obligations.

John Rodgerson, CEO of Azul, stated that the approvals, along with support from key stakeholders, enable Azul to continue its transformation plan and reduce leverage. The company's strategic partners, including United Airlines and American Airlines, have been instrumental in this process, providing financial backing and support for Azul's restructuring efforts.

Azul's restructuring process is unique in the region, as it enters the process with agreements with many of its main stakeholders already in place. The company has secured a commitment for debtor-in-possession financing of approximately $1.6 billion from certain key financial partners, which will repay part of the Company's existing debt and provide the Company with approximately $670 million 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 $650 million, backstopped by some of these financial partners and further supported by a contemplated additional equity investment of up to $300 million from United Airlines and American Airlines, subject to the satisfaction of certain conditions.

Azul's process is unlike any other airline restructuring case in the region, given the fact that it enters the process with agreements with many of its main stakeholders already in place. The company has filed customary motions with the Court to support ordinary-course operations, including continuing Crewmember compensation and benefits programs, honoring all Customer commitments, and fulfilling go-forward obligations to select vendors.

John Rodgerson concluded, "We are grateful for the support of our bondholders, particularly those who are providing Azul with new capital, and our key strategic partners, American Airlines, United Airlines, and AerCap. Their support will allow us to optimize our fleet, reinforce our financial position, and operate more efficiently. We are confident that we will emerge even stronger and better positioned to continue connecting Brazil like no other, while offering the best service and value to our Customers."

References
[1] https://www.prnewswire.com/news-releases/azul-transforms-for-the-future-as-company-reaches-agreements-on-financial-reorganization-with-key-stakeholders-including-its-lenders-largest-lessor-and-strategic-partners-united-airlines-and-american-airlines-302466976.html
[2] https://www.gurufocus.com/news/2891512/american-airlines-aal-involved-in-azuls-restructuring-support-agreements-aal-stock-news