Azul Investments launches exchange offers for notes due 2024, 2026

By Mary-Katherine Stinson

Lexington, Ky., June 13 – Azul SA announced that its wholly owned subsidiary Azul Investments LLP has launched two separate exchange offers for notes due 2024 and 2026, according to multiple press releases and a 6-K filing with the Securities and Exchange Commission.

The company is offering to exchange any and all of the $400 million outstanding 5 7/8% senior notes due 2024 (Cusips: 05502FAA6, U0551UAA1) issued by Azul Investments for newly issued 11½% senior secured second-out notes due 2029 to be issued by Azul Secured Finance LLP.

Separately, the company is also offering to exchange any and all of the $600 million outstanding 7¼% senior notes due 2026 (Cusips: 05502FAC2, U0551UAB9) issued by Azul Investments for newly issued 10 7/8% senior secured second-out notes due 2030 to be issued by Azul Secured Finance LLP.

The new notes will be guaranteed by Azul SA and subsidiaries Azul Linhas Aereas Brasileiras SA, IntelAzul SA and ATS Viagens e Turismo Ltda., as well as Azul IP Cayman Holdco Ltd. and Azul IP Cayman Ltd, which will be incorporated prior to the first settlement date.

Each offer is separate; however, the exchange consideration is the same for each series of notes. The company is offering a total consideration of $1,000 in principal amount of the corresponding new notes, which is comprised of an exchange consideration of $950 of new notes plus an early exchange premium of $50 in new notes for those who tender by the early participation deadline.

Those who tender after the early participation deadline will receive only $950 of corresponding new notes as the exchange consideration.

Accrued interest, if any, will also be paid.

Existing notes that are tendered in the exchange offer will be canceled and not reissued.

Simultaneously, Azul Investments is also conducting separate consent solicitations for each series of notes to eliminate substantially all of the restrictive covenants, events of default and related provisions in each existing notes’ indentures.

Tender noteholders are deemed to have delivered their consents and noteholders may not deliver consents without tendering their notes.

Azul has entered into a transaction support agreement on June 13 between Azul Secured Finance, the guarantors and an ad hoc group of existing noteholders in which they have agreed to tender their existing notes and deliver consents to the proposed amendments prior to the early participation deadline. The supporting noteholders represent 65.5% of the aggregate principal amount of the existing 2024 notes and 65.8% of the aggregate principal amount of the existing 2026 notes outstanding.

This meets the threshold to approve the proposed amendments.

The proposed amendments require the written consent of holders of a majority in aggregate principal amount of the relevant series of outstanding existing notes.

The early participation deadline is 5 p.m. ET on June 27, which is also the withdrawal deadline.

If the company elects to have an early settlement, the date will be determined by Azul Investments.

The offer expires at 11:59 p.m. ET on July 12, with final settlement on July 17.

The exchange offers and consent solicitations are conditioned on a minimum participation condition of at least 70% of the total principal of outstanding existing notes being tendered in each series. In addition, certain amendments to the indenture governing the convertibles issued by Azul and certain collateral and other documents must be amended or replaced, amendments to the forbearance agreement, the global partial deferral agreement and the related collateral and other documents with Azul Linhas must be replaced, certain waivers must be obtained from creditors and certain other customary conditions.

Azul Secured Finance will issue new notes in the minimum denomination of $175,000 and integral multiples of $1 in excess of that amount. No cash will be paid for fractional new notes not received due to rounding.

Global Bondholder Services Corp. is the exchange agent and information agent (212 430-3774, 855 654-2014).

Azul is a Sao Paulo-based airline.

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