Azul and its partners have successfully settled its public offering of convertible debentures in Brazil on Nov 12. Azul issuance of guaranteed secured debentures, convertible into preferred shares of the company, was valued at R$1,745,900.00 (US$ 325 million). The debentures will mature in five years after issuance, are indexed to the US dollar and pay interest of 7.5% in the first year in kind through an increase in the par value of the Debentures (PIK), and thereafter at an interest rate of 6.0% per annum payable semi-annually in cash.
The notes will be redeemable, in whole or in part, for cash at Azul’s option at any time, after 36 months, but only if the last reported share price exceeds 130% of the conversion price for a specified period of time. The public offering included 1,745,900 debentures issued at unit par value of R$1,000 with a conversion price of R$32.2649 per preferred share, resulting in an initial conversion premium of 27.5% based on the 30-trading day Volume Weighted Average Price (VWAP). Anchor investors Knighthead Capital Management and Certares Management were allocated 1,668,720 debentures.
Financial advisors to the company included Seabury Securities and Itau BBA, which acted as sole underwriter for the public offer.
"We want to thank all of our financial partners for their support during this process. Together with our anchor investors Knighthead and Certares, we are setting the stage for a successful long-term partnership. Azul's strategic competitive advantages and unique business model, combined with the strong market recovery in Brazil, lead to us to be optimistic about our future. The successful conclusion of this public offering ensures that we are in a position to be a long-term winner," says John Rodgerson, Chief Executive Officer at Azul.
"Since its founding in 2008, Azul has executed one of the most creative and ambitious business plans in aviation," said Tom Wagner, Founder of Knighthead Capital Management. "Amidst uncertainty around COVID-19, this transaction provides the airline with one of the best liquidity positions in the global industry. Brazil has been an excellent and resilient air travel market for several years, and Azul's strong balance sheet and market position set the stage for its future success. We are excited to partner with management as the company grows in the years ahead."
"Azul is a premier airline that has been recognized globally for delivering great customer experiences and consistently strong financial performance," said Tom Klein Senior Managing Director at Certares. "That, coupled with Azul's being strategically positioned for growth and a long term winner in Latin American aviation, makes partnering with its respected management team ideal for Certares."
“The completion of this issuance speaks to Azul’s strong operating fundamentals and its strategic growth trajectory,” commented John Luth, President & CEO of Seabury Securities. Luth attributed “the measures Azul had taken prior to the health crisis to turn its business model in a leading airline operation, and its robust ability today to tap into strategic growth opportunities,” as key to the success of this unique transaction executed during a counter cyclical period for the industry, contending with immense headwinds related to the pandemic.
John Rodgerson, Azul’s President and Chief Executive Officer, remarked: “Once again, Seabury Securities has played a pivotal role as investment banker and special advisor to Azul, in this case with respect to assisting in lining up Knighthead and Certares as anchor investors for this highly successful placement.”
Alex Malfitani, Azul’s Chief Financial Officer, added: “Seabury Securities was invaluable in assuring a rapid and successful completion of this market transaction.”