Brazil’s Azul Airlines Moves Forward with R$ 3.37B Capital Raise to Strengthen Liquidity

Azul S.A., one of Brazil’s leading airlines, has approved a capital increase of up to R$ 3.37 billion ($561 million) as part of its financial restructuring plan.

The decision, disclosed in a filing to the Brazilian Securities Commission (CVM) on February 20, 2025, aims to strengthen the company’s liquidity. It also ensures compliance with corporate governance rules.

The plan involves issuing between 1.2 billion and 2 billion new common shares at R$ 0.06 each. It also includes issuing up to 722.3 million preferred shares at R$ 4.50 each.

Azul expects to raise a minimum of R$ 72 million ($12 million) and a maximum of R$ 3.37 billion ($561 million). Shareholders will have preemptive rights to subscribe, minimizing dilution for those who participate.

This initiative comes as Azul works to address its $5.8 billion debt burden and improve its financial metrics, including a current ratio of just 0.27.

Recent agreements with lessors and suppliers are expected to generate over $300 million in cash flow from 2025 to 2027, providing additional support for the airline’s recovery efforts.

Azul’s Capital Increase Signals Commitment Amid Challenges

The company’s controlling shareholders have committed to subscribing to the new shares, signaling confidence in Azul’s strategy. Additionally, the move ensures compliance with legal limits on preferred shares with restricted voting rights.

These shares cannot exceed 50% of the total shares issued. Azul has already made progress in its restructuring by converting $557 million ($93 million) of debt into equity.

It also raised $525 million ($88 million) through Floating Rate Superpriority Notes due in 2030. However, challenges remain, including a recent credit rating downgrade by S&P Global Ratings following a distressed debt exchange.

The capital increase highlights Azul’s determination to stabilize its finances while maintaining its position in Brazil’s competitive aviation market. Shareholders will vote on the proposal during an Extraordinary General Meeting on February 25, 2025.