Moody's upgrades Azul

Moody's Investors Service said it upgraded to Caa1 from Caa2 Azul SA's corporate family rating and upgraded to Caa2 from Caa3 the rating of the senior unsecured notes due 2024 and 2026 issued by Azul Investments LLP and guaranteed by Azul.

At the same time, Moody's assigned a Caa1 rating to Azul's secured notes due 2029 and 2030 and a B3 rating to Azul's planned first-lien secured notes due 2028 both issued by Azul Secured Finance LLP (Delaware) and guaranteed by Azul. The agency also revised the outlook for Azul and Azul Investments to positive from negative. A positive outlook was assigned for Azul Secured Finance.

The secured issuances are part of Azul's liability management strategy and proceeds will be used for repayment of outstanding indebtedness and to increase Azul's cash position, lengthening the company's debt amortization schedule and deepening its liquidity.

“The upgrade of Azul's CFR to Caa1 reflects the material improvement in liquidity following the execution of the company's financial restructure. Azul has renegotiated lease payments with lessors, exchanged its senior unsecured notes maturing in 2024 and 2026 for new secured notes due 2029 and 2030 and will issue new first-lien secured notes due 2028, all of which significantly reduced near-term cash needs and enhanced its cash position,” Moody’s said in a press release.

Additionally, the agency said it forecasts Azul's cash position will remain above R$2 billion in 2023-25 after all initiatives, while its Moody's-adjusted leverage will continue to decrease to around 4x-5x over the same period, from 7.5x at the end of March 2023.

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