Azul Linhas Aéreas Brasileiras (AD, São Paulo Viracopos) is not considering filing for Chapter 11 bankruptcy protection in the United States and is instead now negotiating with lessors to pay USD600 million for shares to settle its debt over the next three years, the company’s chief executive, John Rodgerson, told the newspaper Folha de S.Paulo in an interview.
“Since the Covid-19 pandemic, we have been negotiating contracts with our creditors and have agreed with the lessors that we will pay off the debt over the next three years. This debt begins to mature next year, and we had the option of paying it with stock, more debt, or cash,” he said.
While the negotiations are ongoing and are expected to be completed within the next 30 days, the chief executive said both parties would agree on a fixed instalment that could be around 20% of the company.
The company confirmed last week that it was negotiating to optimise its equity structure and developing a new plan to improve profitability and liquidity. Bloomberg reported that a potential Chapter 11 bankruptcy protection in the United States was possible. However, Rodgerson denied the reports, saying that Chapter 11 is a very damaging procedure for lessors, the company’s partners.
If an agreement with the lessors is not reached, Azul suggests the possibility of an out-of-court negotiation where, for instance, the debt repayment period could be extended to ten years instead of three.
Rodgerson also said that there are other ways to capitalise Azul, such as recently approved changes to the national civil aviation fund (Fundo Nacional de Aviação Civil - FNAC) law, which include the possibility of offering airlines up to BRL5 billion reais (USD886 million) in credit.
ch-aviation has reached out to Azul for comment on this story.
