Azul Announces Early Participation Results for the Previously Announced Exchange Offers in respect of Existing 2029 Second Out Notes and Existing 2030 Second Out Notes for New Notes and Solicitations of Consents to Proposed Amendments to the Existing Indenture

Rhea-AI Summary

Azul announced early participation results for its exchange offers of existing 2029 and 2030 Second Out Notes. As of January 7, 2025, 97.8% of 2029 Notes and 94.4% of 2030 Notes were validly tendered, representing 95.4% of total outstanding principal amount for both series combined.

The Minimum Exchange Condition requiring 95% participation has been satisfied. The withdrawal deadline expired on January 7, 2025, and holders can no longer withdraw tendered notes. The company amended the terms to offer the Total Early Exchange Consideration to holders who tender after the Early Participation Deadline but before the January 15, 2025 Expiration Deadline.

Settlement is expected on January 22, 2025. The exchange offers are subject to conditions including the issuance of at least $500 million in Superpriority Notes and the First Out Notes Exchange Offer, which has achieved 99.6% participation.

Positive

• High participation rate achieved: 95.4% of total notes tendered
• Minimum Exchange Condition of 95% participation met
• First Out Notes Exchange Offer reached 99.6% participation

Negative

• None.

Insights

Financial Restructuring Expert

This debt restructuring announcement reveals critical progress in Azul's financial reorganization. The company has achieved 97.8% participation for 2029 notes and 94.4% for 2030 notes, exceeding the important 95% minimum threshold for both series combined. The high participation rate indicates strong creditor support for the restructuring plan. The exchange offers maintain the same interest rates of 11.500% for 2029 notes and 10.875% for 2030 notes, while introducing new secured notes with modified terms. Most significantly, this restructuring links to a broader capital structure overhaul, including the issuance of at least $500 million in superpriority notes and modifications to convertible debentures. For investors, this represents a substantial deleveraging effort that could strengthen Azul's balance sheet and improve its debt service capacity.

Airline Industry Analyst

This debt exchange marks a pivotal moment for Azul's financial health amid challenging conditions in the Latin American aviation sector. The overwhelming creditor support, particularly the 99.6% participation in the First Out Notes exchange, demonstrates market confidence in Azul's recovery strategy. Think of this as a financial runway extension - it gives Azul breathing room to navigate through current market conditions while maintaining operational stability. The restructuring preserves the company's vital relationships with creditors while creating a more sustainable debt profile. For a smaller carrier with a $241.7 million market cap, this level of creditor cooperation is remarkably positive and suggests strong faith in management's turnaround plan.

SÃO PAULO, Jan. 8, 2025 /PRNewswire/ -- Azul S.A., "Azul," (B3: AZUL4, NYSE: AZUL) ("Azul") today announced the early participation results for the previously announced separate offers by its wholly-owned subsidiary Azul Secured Finance LLP (the "Issuer") to Eligible Holders to exchange (such offers, the "Exchange Offers") (i) any and all of the outstanding 11.500% Senior Secured Second Out Notes due 2029 issued by the Issuer (the "Existing 2029 Notes") for newly issued 11.500% Senior Secured Second Out Notes due 2029 to be issued by the Issuer (the "New 2029 Notes") and (ii) any and all of the outstanding 10.875% Senior Secured Second Out Notes due 2030 issued by the Issuer (the "Existing 2030 Notes" and, together with the Existing 2029 Notes, the "Existing Notes") for newly issued 10.875% Senior Secured Second Out Notes due 2030 to be issued by the Issuer (the "New 2030 Notes" and, together with the New 2029 Notes, the "New Notes"), pursuant to the terms and subject to the conditions set forth in the confidential exchange offering memorandum and consent solicitation statement, dated December 17, 2024 in respect of the Exchange Offers and Solicitations (the "Offering Memorandum").

Any capitalized terms used in this press release without definition have the respective meanings assigned to such terms in the Offering Memorandum.

Early Participation Results for the Exchange Offers

As of 5:00 p.m., New York City time, on January 7, 2025 (the "Early Participation Deadline"), Morrow Sodali International LLC, trading as Sodali & Co, the information agent and exchange agent in connection with the Exchange Offers and the Solicitations (the "Information and Exchange Agent") advised Azul that (i) 97.8% of the total outstanding principal amount of the Existing 2029 Notes, (ii) 94.4% of the total outstanding principal amount of the Existing 2030 Notes, and (iii) 95.4% of the total outstanding principal amount of both series of Existing Notes (taken together), had been validly tendered for exchange and not validly withdrawn.

The obligation of the Issuer to complete the Exchange Offers is subject to the receipt of Existing Notes validly tendered (and not validly withdrawn) prior to the Expiration Deadline representing not less than 95% of the aggregate principal amount of both series of Existing Notes (taken together) (the "Minimum Exchange Condition"), among other conditions. The Minimum Exchange Condition for consummation of the Exchange Offers has been satisfied.

The Withdrawal Deadline for each of the Exchange Offers expired at 5:00 p.m., New York City time, on January 7, 2025 and has not been extended. Accordingly, Holders may no longer withdraw Existing Notes tendered in the Exchange Offers, including, for the avoidance of doubt, any Existing Notes tendered on or after the date hereof and prior to the Expiration Deadline (as defined below), except as required by law.

Upon the terms and subject to the conditions set forth in the Offering Memorandum, Eligible Holders who validly tendered Existing Notes and delivered related Consents by the Early Participation Deadline and who did not validly withdraw tendered Existing Notes and did not revoke such Consents at or prior to the Withdrawal Deadline, and whose Existing Notes are accepted for exchange by the Issuer, will receive the applicable Total Early Exchange Consideration.

Early Participation Results for the Consent Solicitation

As previously announced, simultaneously with the Exchange Offers, the Issuer is conducting a Solicitation of Consents from Eligible Holders of the Existing Notes to effect the Proposed Amendments to the Existing Notes Indenture in respect of each series of Existing Notes. As of the Early Participation Deadline, the Information and Exchange Agent advised Azul that the Issuer has received the requisite Consents sufficient to effect the Proposed Amendments with respect to Existing Notes of each series.

Amendment to the Terms of the Exchange Offers

The Issuer hereby announces that, as permitted by the terms of the Exchange Offers, it has amended each of the Exchange Offers such that Eligible Holders who validly tender Existing Notes and deliver related Consents after the Early Participation Deadline but at or prior to the Expiration Deadline, and whose Existing Notes are accepted for exchange by the Issuer, will receive the applicable Total Early Exchange Consideration, which is the same consideration that will be received by Eligible Holders who validly tendered Existing Notes at or prior to the Early Participation Deadline.

Accordingly, upon the terms and subject to the conditions set forth in the Offering Memorandum (as amended hereby), Eligible Holders who validly tender Existing Notes and deliver related Consents after the Early Participation Deadline but at or prior to 11:59 p.m., New York City time, on January 15, 2025, unless extended or earlier terminated by the Issuer (such date and time, as they may be extended, the "Expiration Deadline"), and whose Existing Notes are accepted for exchange by the Issuer, will receive the applicable Total Early Exchange Consideration.

Settlement Date

The Issuer does not currently expect to elect to have an Early Settlement Date, but retains discretion to elect to do so in accordance with the terms of the Exchange Offers.

Accordingly, upon the terms and subject to the conditions of the relevant Exchange Offer, the sole Settlement Date for the Exchange Offers is expected to be January 22, 2025, which is the fourth business day following the Expiration Deadline, unless extended by the Issuer (at its sole option).

Conditions to the Consummation of the Exchange Offers

The obligation of the Issuer to complete an Exchange Offer and related Solicitation with respect to either series of Existing Notes is subject to certain conditions described in the Offering Memorandum (the "Conditions"), which include (i) the Minimum Exchange Condition, (ii) certain amendments to the indenture (escritura de emissão de debêntures) governing the convertible debentures issued by Azul and certain collateral and other documents are required to be amended or replaced in respect of such convertible debentures, (iii) the issuance of at least US$500,000,000 in aggregate principal amount of the Superpriority Notes, secured by the Shared Collateral and other collateral on a "superpriority" basis, the issuance of which is subject to the terms and conditions of the Transaction Support Agreement, including the satisfaction of the conditions precedent set forth therein, (iv) the consummation of First Out Notes Exchange Offer in accordance with the terms set forth in the First Out Notes Exchange Offer Memorandum (which First Out Notes Exchange Offer is conditioned, among other conditions, on the participation of not less than 66.67% of the aggregate principal amount of the Existing First Out Notes (the "1L Participation Condition"), (v) if the Issuer elects to have an Early Settlement Date, the Issuer shall determine that New Notes issued by the Issuer on the Final Settlement Date will be fungible with the New Notes issued by the Issuer on the Early Settlement Date for U.S. federal income tax purposes, and (v) certain other customary conditions. Certain of these conditions are subject to waiver by Azul.

The Information and Exchange Agent has advised Azul that, as of the early participation deadline for the First Out Notes Exchange Offer, 99.6% of the aggregate principal amount of the Existing First Out Notes had been validly tendered and not validly withdrawn. Accordingly, the 1L Participation Condition has been satisfied.

Miscellaneous

Except as amended as set forth under the heading "Amendment to the Terms of the Exchange Offers" in this press release, the terms and conditions of the Exchange Offers and the Solicitations, as previously announced and described in the Offering Memorandum, remain unchanged. Azul provided certain information relating to the launch of the Exchange Offers and the Solicitations in a Form 6-K furnished to the Securities and Exchange Commission on December 18, 2024.

The offering, issuance and sale of the New Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws. Only Eligible Holders of Existing Notes who have properly completed and submitted the Eligibility Certification are authorized to receive and review the Offering Memorandum. The Eligibility Certification requires holders of Existing Notes to certify, among other things, that they are either (1) a U.S. Person that is also a qualified institutional buyer (as defined in Rule 144A under the Securities Act) that is not, has not been during the prior three months prior, and on the applicable Settlement Date will not be, a director, officer or "affiliate" (as defined in Rule 144 under the Securities Act) of the Issuer or any other Obligor; or (2) a person other than a U.S. Person (as defined in Rule 902(k) under the Securities Act) that is outside the United States. Only Eligible Holders that also comply with the other requirements set forth in the Offering Memorandum are eligible to participate in the Exchange Offers and the Solicitations. In addition, the New Notes may not be transferred to or held by a Competitor.

Holders who desire to obtain and complete an eligibility certification and access the Offering Memorandum should visit the website for this purpose at https://projects.sodali.com/azul or contact the Information and Exchange Agent. Requests for documentation and questions regarding the Exchange Offers and the Solicitations can be directed to Sodali & Co at its telephone numbers  +1 203 658 9457 and +44 20 4513 6933 or by email at azul@investor.sodali.com.

No Offer or Solicitation

This press release does not constitute an offer to buy or the solicitation of an offer to sell the Existing Notes in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. This press release does not constitute an offer to sell or the solicitation of an offer to buy the New Notes, nor shall there be any sale of the New Notes in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. The New Notes will not be registered under the Securities Act or the securities laws of any state and may not be offered or sold in the United States absent registration or an exemption from the registration requirements of the Securities Act and applicable state securities laws. The Exchange Offers and Solicitations are being made only pursuant to the Offering Memorandum and only to such persons and in such jurisdictions as is permitted under applicable law.

The New Notes have not been and will not be issued or placed, distributed, offered or traded in the Brazilian capital markets. The issuance of the New Notes has not been nor will be registered with the CVM. Any public offering or distribution, as defined under Brazilian laws and regulations, of the New Notes in Brazil is not legal without prior registration under Brazilian Securities Markets Law, and CVM Resolution 160, dated July 13, 2022, as amended. Documents relating to the offering of the New Notes, as well as information contained therein, may not be supplied to the public in Brazil (as the offering of the New Notes is not a public offering of securities in Brazil), nor be used in connection with any offer for subscription or sale of the New Notes to the public in Brazil, except to professional investors (as defined under Brazilian laws and regulations), and in accordance with CVM Resolution 160. The New Notes will not be offered or sold in Brazil, except in circumstances, which do not constitute a public offering, placement, distribution or negotiation of securities in the Brazilian capital markets regulated by Brazilian legislation. Holders of Existing Notes should consult with their own counsel as to the applicability of registration requirements or any exemption therefrom.

None of the Issuer, the Guarantors, any of their respective directors or officers, the Information and Exchange Agent, or the Existing Notes Trustee, the New Notes Trustee, or in each case, any of their respective affiliates, makes any recommendation as to whether Eligible Holders should tender or refrain from tendering all or any portion of the Existing Notes in response to either of the Exchange Offers, or deliver Consents in response to the Solicitations. Eligible Holders will need to make their own decision as to whether to tender Existing Notes in the Exchange Offers and participate in the Solicitations and, if so, the principal amount of Existing Notes to tender.

Cautionary Statement Regarding Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the U.S. federal securities laws. These forward-looking statements are based mainly on our current expectations and estimates of future events and trends that affect or may affect our business, financial condition, results of operations, cash flow, liquidity, prospects and the trading price of our securities (including the Existing Notes and the New Notes), including the potential impacts of the material transactions referred to in this press release. Although we believe that any forward-looking statements are based upon reasonable assumptions in light of information currently available to us, any such forward-looking statements are subject to many significant risks, uncertainties and assumptions, including those factors discussed under the heading "Risk Factors" in the company's annual report on Form 20-F for the year ended December 31, 2023 and any other cautionary statements which may be made or referred to in connection with any such forward-looking statements.

In this press release, the words "believe," "understand," "may," "will," "aim," "estimate," "continue," "anticipate," "seek," "intend," "expect," "should," "could," "forecast" and similar words are intended to identify forward-looking statements. You should not place undue reliance on such statements, which speak only as of the date they were made. Except as required by applicable law, we do not undertake any obligation to update publicly or to revise any forward-looking statements after the date of this press release because of new information, future events or other factors. Our independent public auditors have neither examined nor compiled the forward-looking statements and, accordingly, do not provide any assurance with respect to such statements. In light of the risks and uncertainties described above, the future events and circumstances discussed in this press release might not occur and are not guarantees of future performance. Because of these uncertainties, you should not make any investment decision based upon these forward-looking statements.

About Azul

Azul S.A. (B3: AZUL4, NYSE: AZUL), the largest airline in Brazil by number of flight departures and cities served, offers 1,000 daily flights to over 160 destinations. With an operating fleet of over 180 aircraft and more than 15,000 Crewmembers, Azul has a network of 300 non-stop routes. Azul was named by Cirium (leading aviation data analysis company) as the most on-time airline in the world in 2022, being the first Brazilian airline to obtain this honor. In 2020, Azul was awarded best airline in the world by TripAdvisor, the first time a Brazilian flag carrier earned the number one ranking in the Traveler's Choice Awards.

For more information visit https://ri.voeazul.com.br/en. Information on Azul's website does not constitute a part of this press release.

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SOURCE Azul S.A.

FAQ

What percentage of Azul's 2029 Notes were tendered in the exchange offer?

97.8% of the outstanding principal amount of Azul's 2029 Notes were validly tendered for exchange as of January 7, 2025.

When is the settlement date for Azul's (AZUL) exchange offers?

The settlement date is expected to be January 22, 2025, which is four business days following the Expiration Deadline.

What is the expiration deadline for Azul's note exchange offers?

The expiration deadline is 11:59 p.m., New York City time, on January 15, 2025, unless extended or terminated earlier.

What is the minimum exchange condition for Azul's note exchange offers?

The minimum exchange condition requires not less than 95% of the aggregate principal amount of both series of Existing Notes combined.

How much Superpriority Notes must be issued as a condition for the exchange offers?

The exchange offers require the issuance of at least US$500,000,000 in aggregate principal amount of Superpriority Notes.