Shearman & Sterling has advised Brazilian airline Azul S.A. and its subsidiaries in connection with a comprehensive restructuring plan to significantly strengthen its capital structure and improve its cash generation, which includes a US$2.25 billion restructuring described below, as well as the long-term reprofiling of Azul’s aircraft lease and original equipment manufacturer liabilities, subject to certain conditions.

These innovative and highly complex transactions included:

• exchange offers and consent solicitations, pursuant to which Azul offered to exchange a total of US$1 billion of 5.875% Senior Notes due 2024 and 7.250% Senior Notes due 2026 on a par-for-par basis for 11.500% Senior Secured Second Out Notes due 2029 and 10.875% Senior Secured Second Out Notes due 2030, respectively, which transactions included support from an ad hoc group of bondholders and resulted in an overall exchange offer acceptance rate of 86%;
• the issuance of US$800 million of 11.930% Senior Secured First Out Notes due 2028;
• the restructuring of approximately US$350 million of convertible debentures;
• the establishment of two separate shared collateral packages: (1) a collateral package comprising receivables generated by TudoAzul (Azul’s loyalty program), receivables generated by Azul Viagens (Azul’s travel package business) and brands, domain names and certain other intellectual property used by the Azul airline business, TudoAzul and Azul Viagens, and (2) an additional collateral package comprising receivables generated by the Azul Cargo business (Azul’s cargo transportation services business) certain brands, domain names and certain other intellectual property used by the Azul Cargo business; and
• intercreditor and security sharing arrangements that established a two-tiered structure for each of the shared collateral packages, enabling (1) the shared collateral package to initially secure the newly issued 2028 notes, 2029 notes and 2030 notes, the convertible debentures and US$105 million of aircraft lease liabilities, and (2) the Azul Cargo collateral package to secure the 2029 notes and the 2030 notes, with capacity to secure additional future financing on a first out basis.

The new notes issued in these transactions were issued by Azul Secured Finance LLP and guaranteed by Azul S.A. and its subsidiaries Azul Linhas Aéreas Brasileiras S.A., IntelAzul S.A. and ATS Viagens e Turismo Ltda., as well as Azul IP Cayman Holdco Ltd. and Azul IP Cayman Ltd. which own the relevant intellectual property in a bankruptcy remote structure. 

Citigroup acted as sole structuring agent and lead dealer manager and solicitation agent in connection with the exchange offers and consent solicitations and Itaú BBA, J.P. Morgan and UBS Investment Bank acted as dealer managers and solicitation agents. Citigroup acted as sole structuring agent, lead bookrunner and global coordinator of the bond issuance, and Itaú BBA, Jefferies, J.P. Morgan and UBS Investment Bank acted as joint bookrunners. 

Azul is the largest airline in Brazil by number of flight departures and cities served. In 2022, Azul was named the most on-time airline in the world by Cirium, and in 2020 Azul was awarded best airline in the world by TripAdvisor.

The Team

The Shearman & Sterling team was supported by Nicolle Bretas and Juliana de Meneses from our Latin America Capital Markets group.