Azul Moves Toward Exit from Bankruptcy Process After U.S. Approval of Its Restructuring Plan
The Brazilian airline Azul has received authorization from a U.S. court to exit the bankruptcy process and implement a creditor-backed reorganization plan, a decision that marks a turning point for the company after more than a year of financial pressure.
Court Approval to Leave Chapter 11 Behind
During a hearing held on Friday night in New York, Judge Sean Lane confirmed he would approve the submitted plan, clearing the way for Azul to exit Chapter 11 early next year. This ruling allows the company to move forward with a revised financial structure and new capital resources.
The agreement includes a reduction of over $2.6 billion in debt and aircraft leasing obligations, as well as the raising of up to $950 million through equity investments, according to court documents.
Strategic Investment from U.S. Airlines
As part of the process, United Airlines Holdings and American Airlines Group will participate directly in the Brazilian company’s equity. Each will contribute $100 million, granting them an 8.5% stake in the new shareholding once Azul completes its exit from Chapter 11, according to data from Bloomberg Intelligence.
This financial backing adds to the majority support obtained from creditors, including agreements with major lenders and its largest lessor, AerCap, a key player in the reorganization scheme.
→ Azul Launches Direct Flights Between São Paulo-Congonhas and Foz do Iguaçu
Creditors and Bondholders Accept Debt Conversion
The approved plan also stipulates that bondholders, with approximately $1.8 billion in outstanding debt, agreed to exchange those obligations for equity in the reorganized company. Among the groups supporting this initiative are BlackBarn Capital, Readystate Asset Management, Whitebox Advisors, and DSC Meridian Capital, according to a disclosure made in August.
This conversion aims to alleviate the financial burden and align investor interests with the airline’s future performance.
Regulatory Approvals in Brazil Still Pending
Although the judicial green light represents a decisive step forward, the restructuring still depends on regulatory approvals in Brazil. This was indicated by a company lawyer during a prior hearing held on Thursday, emphasizing that the process is not completely closed.
Context of the Process and Sector Situation
Azul sought protection under Chapter 11 in May, after facing rising costs and the prolonged impact of the Covid-19 pandemic on the airline industry for over a year. In the regional market, Gol Linhas Aereas Inteligentes sought court protection last year, while the U.S.-based Spirit Aviation Holdings filed for bankruptcy in August for the second time in less than twelve months.
A Structure Prepared for a Challenging Environment
The company has stated that its strengthened balance sheet and a reorganized fleet position it as a “more robust and resilient” airline, capable of facing economic forces such as fuel price volatility, factors that contributed to its entry into Chapter 11.
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