Azul S.A.: Successful Exchange Offers and Consent Solicitations for Senior Secured Notes
On January 22, 2025, Azul S.A., commonly known as Azul, announced the successful completion of two exchange offers and consent solicitations for its Senior Secured Second Out Notes. The offers were made by Azul’s wholly-owned subsidiary, Azul Secured Finance LLP (the “Issuer”).
The Exchange Offers
The Exchange Offers gave eligible holders of the Issuer’s outstanding 11.500% Senior Secured Second Out Notes due 2029 (the “Existing 2029 Notes”) and 10.875% Senior Secured Second Out Notes due 2030 (the “Existing 2030 Notes”) the opportunity to exchange their existing notes for newly issued notes of the same series. The new notes will be 11.500% Senior Secured Second Out Notes due 2029 (the “New 2029 Notes”) and 10.875% Senior Secured Second Out Notes due 2030 (the “New 2030 Notes”), respectively.
The Terms of the New Notes
The New Notes will have the same terms as their respective existing counterparts, except for the following:
- The New Notes will bear the same interest rates as the Existing Notes.
- The New Notes will have a longer call protection period of 112 months (approximately 9.33 years) from the original issue date.
- The New Notes will not contain certain restrictive covenants that are contained in the indenture governing the Existing Notes.
The Consent Solicitations
In connection with the Exchange Offers, the Issuer also solicited consents from eligible holders of the Existing Notes to certain proposed amendments. The proposed amendments included:
- The elimination of certain restrictive covenants.
- The addition of a provision allowing Azul to issue additional Senior Secured Notes without the consent of the holders of the Existing Notes.
Impact on Azul and Eligible Holders
The successful completion of the Exchange Offers and Consent Solicitations provides several benefits to Azul:
- Azul will benefit from the extension of the call protection period for its Senior Secured Notes, which will reduce its refinancing risk.
- The elimination of certain restrictive covenants will provide Azul with greater operational flexibility.
- The addition of a provision allowing Azul to issue additional Senior Secured Notes without consent will enhance its ability to raise capital in the future.
Eligible holders who participated in the Exchange Offers benefited from the opportunity to receive new notes with longer call protection periods and fewer restrictive covenants.
Impact on the World
The successful completion of the Exchange Offers and Consent Solicitations by Azul is a positive sign for the global debt market. It demonstrates the continued appetite of investors for high-yielding securities and the ability of issuers to refinance debt in a favorable market environment.
Conclusion
Azul’s successful completion of the Exchange Offers and Consent Solicitations is a significant event for the company and its investors. The extension of the call protection period, the elimination of certain restrictive covenants, and the addition of a provision allowing for the issuance of additional Senior Secured Notes will provide Azul with greater financial flexibility and operational efficiency. The transaction is also a positive sign for the global debt market, indicating continued investor interest in high-yielding securities and a favorable market environment for debt refinancing.
Azul’s success serves as a reminder that even in a challenging economic environment, companies can find creative solutions to improve their financial position and enhance shareholder value.
