The efforts of Azul to raise US$400 million in a new debt issuance have encountered yet another obstacle. According to sources heard by Bloombergthe airline is having difficulties to raise resources.
O Jefferies Financial Group had been contacting potential investors to help Azul raise capital through the sale of new debt convertible into shares, but the bank has so far been unable to reach the full amount, according to the sources.
An Azul spokesperson declined to comment. Jefferies did not immediately respond to a request for comment.
A Blue reached an agreement this month with lessors and parts suppliers that would reduce its debt by R$3 billion (US$530 million) in exchange for 100 million new preferred shares. But the deal is conditional on obtaining the new financing that Jefferies has been trying to organize.
Raising new capital is crucial to bolster Azul’s cash position and address short-term refinancing needs. The company has struggled with high interest rates, volatile fuel costs and a weaker Brazilian real. The exchange rate variation caused its gross debt to increase, while the closure of an important airport in the south of Brazil hurt the results.
A Bloomberg reported in August that the Azul evaluated options including a subsequent share offering and filing for bankruptcy protection in the United States (so-called “Chapter 11”) to deal with your debt obligations. Following the report, the company said in a regulatory filing that it was analyzing options, including raising debt using its cargo unit as collateral, and that it preferred “commercial solutions.”
About $68 million is due in bond payments this month, according to Moody’s Ratings, an amount analysts said the company can manage. As of June 30, Azul had R$1.5 billion in debt maturing in the short term and around R$1.4 billion in readily available cash, according to Fitch Ratings.
Azul is the only carrier of the three that dominate Latin America’s largest air travel market to have avoided filing for bankruptcy protection. But it has faced difficulties in strengthening its balance sheet, despite having renegotiated with lessors and completed a bond exchange that postponed maturities to at least 2028.
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