Azul Airlines’ Financial Balancing Act: Creditors Dispute Guarantees

Azul Airlines is at a crucial crossroads in its efforts to restructure its finances. The Brazilian carrier is looking to raise $300-400 million by using its logistics arm, Azul Cargo, as collateral, but this move has caused a rift among its international bondholders due to differing guarantees received in the past.

Despite disagreements, the Ad Hoc Group of Azul Noteholders remains united, representing the majority of senior secured notes due in 2028, 2029, and 2030. The company aims to avoid a deeper restructuring through Chapter 11 bankruptcy and has initiated discussions with lessors and bondholders to find a solution.

Azul’s Financial Maneuvers

Azul Cargo, valued at $800 million, will be the main collateral for raising funds, similar to a previous strategy using its loyalty program last year. Negotiations with bondholders are intertwined with aircraft lease talks as the airline requires capital from current creditors to alleviate financial pressure.

As negotiations unfold, Azul faces challenges such as resolving lessor debts totaling R$18 billion and addressing poor stock performance. The outcome of these discussions will significantly impact Azul’s future stability and growth.

The Brazilian government’s decision to allow the use of the National Civil Aviation Fund (FNAC) as loan collateral offers additional support, positioning Azul for potential success as they navigate these intricate financial waters.