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The deals, Azul said in a securities filing late on Sunday, include the elimination of lease obligations previously deferred during the COVID-19 pandemic and a permanent reduction in lease payments from their original rates to current market rates.
The arrangement had been initially announced in March, when the carrier said it had agreed to give lessors and original equipment manufacturers (OEMs) equity and tradable debt in exchange for lower payments.
“Through these agreements, we have significantly improved our capital structure and cash flow by reducing our lease liabilities and payments, while honoring our commitment to fully compensate our partners,” Chief Financial Officer Alex Malfitani said in the filing.
The airline estimated the restructuring will reduce lease payments by more than 1 billion reais ($198.73 million) per year going forward.
As part of the deals, Azul said it has issued $370 million of 7.5% unsecured notes due 2030, while also agreeing to give lessors and manufacturers up to $570 million in preferred shares of the company valued at 36.00 reais each.
Sao Paulo-traded shares of Azul closed at 14.48 reais on Friday, up 31.5% so far this year but still far below pre-pandemic levels, when they traded above 60 reais in early 2020.
The shares involved in the deal will be issued quarterly, Azul said, starting in the third quarter of 2024 and completed by late 2027.
“During this period, if at the time of measurement the trading price is lower than 36.00 reais, Azul may compensate for the difference by issuing additional preferred shares, through a cash settlement or issuing new debt instruments,” it noted.
“If the trading price is higher than certain thresholds, the number of shares will be capped at these thresholds.”
($1 = 5.0320 reais)
