Brazilian carrier Azul received court approval on 12 December for its Chapter 11 reorganisation plan, clearing the way for the airline to emerge from the bankruptcy process early next year.
Approval of the plan is a sign that the Sao Paulo-based carrier’s restructuring is nearly complete. It filed for Chapter 11 protection in the US Bankruptcy Court for the Southern District of New York on 28 May.
Securing the court’s approval in relatively short order ”speaks to Azul being able to work very closely and amicably with its shareholders, its bondholders and its commercial partners such as lessors”, Fabio Campos, Azul’s chief institutional and corporate officer, tells FlightGlobal on 15 December.
“We came in with the support of our largest lessor, AerCap,” he says. “We came in wih the support of our bondholders. And we came in with the support of two strategic partners – United Airlines, which is a long-term partner of Azul, but also American Airlines as a new strategic partner. United continuing to be an equity holders and American becoming an equity holder [shows] the faith they have in the future of aviation in the region.”
As part of its restructuring plan, Azul has set about shedding debt and reworking deals with lessors. The company says it has eliminated some $3 billion in liabilities through the process.
“We revamped all the contracts in the company,” Campos says. “We negotiated with all of the lessors, all of the OEMs. It was a complete transformation of the business, and we did it in just a little over six months.”
There is still work to do. Now, the company intends to implement a public offering with automatic registration with the Brazilian Securities Commission. Creditors with claims against Azul can convert their claims into equity in the company by issuing new shares.
”Current shareholders who do not exercise their pre-emptive rights will face significant dilution, and the final ownership proportions may be adjusted based on any additional subscriptions by shareholders exercising such rights,” Azul says.
Then, it will execute a new public offering to raise up to $950 million of new capital. Shares issued in connection with this offering will be offered “at a price representing a 30% discount to the company’s equity value”.
Azul says that its plan will result in ”a widely dispersed capital structure upon completion of the restructuring process”. There will be no controlling shareholder of the post-restructuring company.
Campos says that Azul is still tracking to emerge from Chapter 11 in February, which would amount to “record time” for completing the often-lengthy and always-complex restructuring process. He maintains that the post-bankruptcy Azul will be in a stronger position than the pre-pandemic company.
”We’re extremely excited about the next couple months where we’re going to be able to recapitalise the company and … emerge stronger than we could have ever dreamed of being,” he says.
Despite posting a relatively strong operating profit of R$1.3 billion ($240 million) in the third quarter, Azul’s net loss during the period was R$644 million.
Azul attributes this discrepancy to one-time costs relating to restructuring.
