Fitch downgrades Azul

Fitch Ratings said it downgraded Azul SA's long-term foreign- and local-currency issuer default ratings to C from CCC- and its national scale rating to C(bra) from CCC(bra). Additionally, Fitch cut Azul Investments LLP's unsecured notes to C/RR4 from CCC-/RR4.

“The downgrades follow Azul's announcement of an exchange offers of existing senior notes ($1 billion) for new senior secured second-out notes, which Fitch views as distressed debt exchange (DDE) as per its criteria. The transaction will not result in an immediate debt haircut but will require a maturity extension, and structural subordination is likely for bondholders that do not accept the deal due to the larger secured debt profile.

“The deal is part of a more comprehensive debt restructuring plan that includes renegotiations with lessors and original equipment manufacturers (OEMs) pending completion of the exchange offer. These transactions are intended to enhance liquidity and capital structure and to ultimately avoid future default payments,” Fitch said in a press release.

If the exchange goes through, the agency said it will downgrade Azul to RD, restricted default, and then re-rate the company.

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