Brazilian carrier Azul has officially concluded its US Chapter 11 bankruptcy proceedings, marking the end of a nine-month restructuring process. The airline successfully eliminated approximately $2.5 billion in debt and lease obligations. While this provides a radically cleaner balance sheet, the question remains whether this financial relief is sufficient to secure a lasting turnaround for the company.
Operational Stability and Strategic Partnerships
Throughout the restructuring period, Azul maintained stable operations, conducting roughly 800 daily flights. CEO John Rodgerson now faces the task of leveraging the streamlined finances to modernize the fleet and expand the route network. The coming months will focus on executing these growth plans and securing final regulatory approval for a key partnership.
The company’s recapitalization received significant backing from two major US aviation players. United Airlines and American Airlines each committed $100 million to support the relaunch. United’s investment was finalized last Friday through a subscription right, while American Airlines’ participation is structured via warrants. The latter remains contingent on approval from Brazil’s antitrust authority, CADE.
A New Financial Foundation
The completion of the proceedings allows Azul to rebuild its capital structure on a new footing. The company secured about $1.375 billion in new debt financing through the issuance of senior notes, alongside commitments for $950 million in fresh equity.
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These measures are designed to drastically reduce interest expenses. According to company statements, annual interest payments will be cut by more than 50%. The goal is to push the pro forma net debt to EBITDA ratio below 2.5.
Shareholder Dilution: The Cost of Rescue
The financial rescue comes at a steep price for existing shareholders. As part of the capital measures, the company’s share capital increased to 21.76 billion BRL. The total number of common shares expanded massively to approximately 54.73 trillion.
The new securities were issued at a significant discount to market value. This anticipated massive increase in the share supply triggered a sell-off, with the stock price plummeting over 30% ahead of the finalization. Furthermore, if all approved warrants are fully exercised, the total share count could rise to over 62 trillion.
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