Azul Credit Score Cut by Fitch on Distressed Debt Exchange Plan

Published 15 June 2023, 05:33:55 UTC+8:00

(Bloomberg) -- Azul SA was downgraded by Fitch Ratings on Wednesday after the Brazilian airline announced a bond-swap offer that meets the credit assessor’s criteria for a distressed debt change.

• Fitch cut Azul to C from CCC- after the the company offered to exchange notes maturing in 2024 and 2026 for securities maturing in 2029 and 2030, respectively, with a higher coupon rate
• “The transaction will not result in an immediate debt haircut but will require a maturity extension, and structural subordination is likely for bondholders that do not accept the deal due to the larger secured debt profile,” Fitch analysts including Debora Jalles wrote in a Wednesday statement
• Azul’s bonds due in 2026 advanced 1.3 cents on the dollar Wednesday to about 83 cents, the highest since May 2022
• The transaction will allow Azul to reduce refinancing risk and improve liquidity by extending its debt amortisation schedule, Lucror Analytics analyst Josseline Jenssen wrote in a note