Brazilian Airline Azul Seeks $400 Million in Fresh Capital

By Gabriel Araujo and Luciana Magalhaes

SAO PAULO (Reuters) – Brazilian airline Azul is in talks with multiple parties to raise about $400 million in fresh capital via debt financing, with an agreement potentially coming as soon as this week, according to three sources close to the discussions.

Azul dominates Brazil's airline industry along with LATAM and Gol. The airline successfully avoided Chapter 11, unlike several Latin American carriers, which filed for bankruptcy after the COVID-19 pandemic, including its two main rivals.

The fresh capital requirement stems from Azul's recent agreement with lessors to forgo nearly $550 million in obligations in exchange for an equity stake, aimed at alleviating concerns regarding its debt load and improving cash flow.

Sources indicate that Azul has two main options: a financing arrangement with its existing group of bondholders or capital arranged by Jefferies from additional investors. An agreement with bondholders could involve a future debt-for-equity swap alongside a new debt component, while the Jefferies option may include a traditional convertible bond.

Azul has refrained from commenting, and Jefferies did not respond to inquiries.

The carrier previously stated that it sought to raise capital, possibly utilizing its Azul Cargo unit as collateral, but details surrounding the cargo's involvement remain unclear.

Azul has faced challenges this year from a declining exchange rate and severe flooding in the crucial market of Porto Alegre. The recent agreement with lessors hinged on modifications to other obligations, including securing additional financing.