Azul Investments reports 86% acceptance rate in early exchange period

By Mary-Katherine Stinson

Lexington, Ky., June 28 – Brazil’s Azul SA and its wholly owned subsidiary Azul Investments LLP reported a total acceptance rate of 86% during the early exchange period for its two separate exchange offers for notes due 2024 and 2026, according to a press release and a 6-K filing with the Securities and Exchange Commission.

As previously reported, 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.

As of the early participation deadline of 5 p.m. ET on June 27, $291,170,000, or 72.8%, of the 2024 notes and $567,602,000, or 94.6%, of the 2026 notes have been tendered in the offer.

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 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 of new notes for those who tendered 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.

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.

Azul announced it has gained the consents by the early deadline.

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

The early tender deadline was also the withdrawal deadline. Tendered notes are now irrevocable.

The offer has been amended to remove the prohibition on partial tenders.

When the offer was launched on June 13, Azul entered into a transaction support agreement between Azul Secured Finance, the guarantors and an ad hoc group of existing noteholders in which they 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, which ensured that the threshold would be met to approve the proposed amendments.

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. This condition has also been satisfied by the early deadline.

Other conditions remain. 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 some other customary conditions must be met.

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 slated for July 17.

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

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.

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.

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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