Ad Hoc Bondholder Group in Azul’s Confirmed Pre-Arranged Chapter 11 Restructuring

Cleary Gottlieb continues to represent an ad hoc cross-holder group of secured bondholders of Azul S.A. (Azul), the largest airline in Brazil by number of cities served, in the restructuring of Azul’s debt under Chapter 11 protection in the U.S.

The group represents more than 65% of Azul’s total secured debt and is ultimately comprised of more than 20 leading financial institutions and some of the largest U.S.-based hedge funds.

On December 12, 2025, the U.S. Bankruptcy Court Southern District of New York approved Azul’s Disclosure Statement and the solicitation of Azul’s Chapter 11 Plan. Holders of over $4.8 billion in claims voted to accept the plan, which represents more than 90% (by number) of creditors who returned ballots in each voting class under the plan. The court’s confirmation of the plan comes less than seven months after filing, reflecting the plan’s broad stakeholder support, and positions Azul to emerge with a substantially de-levered balance sheet, improved liquidity, a strengthened business plan, and new governance arrangements.

Cleary played a central role in structuring and negotiating a fully prearranged Chapter 11 plan that addressed the interests of multiple creditor classes and provided Azul with the financing runway needed to stabilize operations. Within six weeks of being notified of Azul’s severe liquidity challenges, Cleary and the financial advisor helped drive consensus across the capital structure for a comprehensive in-court restructuring and arranged a debtor-in-possession (DIP) financing package of approximately $1.6 billion, including a meaningful amount of new capital that allowed Azul to operate without interruption during the restructuring.

The restructuring provided for, among other things, the tax-efficient equitization of all of Azul’s first lien and second lien debt and the backstopping of a $650 million equity offering, which will be open to all equitizing first and second lien creditors at a 30% discount to plan value.

Cleary also led efforts to develop a restructuring plan that created opportunity for a substantial strategic investment by Azul’s airline partners, American Airlines, and United Airlines. Cleary worked closely with the advisors to the Official Committee of Unsecured Creditors to reach a consensual settlement that facilitated an expedited and value maximizing resolution of the case.

This restructuring follows Cleary’s work representing Azul creditors in two previous out-of-court restructurings, in which creditors reshaped Azul’s balance sheet and provided over $750 million of new funding to Azul. Despite those efforts, Azul found itself unable to meet its ongoing liquidity challenges and filed for Chapter 11 in May 2025. Upon emergence from Chapter 11, Azul’s secured creditors will own a substantial majority of the equity of the reorganized Azul, reflecting their critical role in facilitating the restructuring and recapitalization of the company.

Cleary’s work with Azul on these groundbreaking transactions are the most recent examples of the firm’s deep experience in helping stakeholders navigate the ups and downs of the aviation sector. Since the onset of the COVID-19 pandemic, Cleary has played a leading role in the restructurings (and other transformative transactions) of LATAM Airlines, Aeroméxico, GOL, Garuda, SAS AB, Nordic Aviation, Asiana Air, Jet Blue, and the U.S. Treasury in connection with its Payroll Support Program and Rescue Plan, providing over $30 billion across 13 different financings for U.S. airlines.

For more information, please see the press release here.

The Cleary restructuring and corporate teams included partners Rich Cooper, Francisco Cestero, Thomas Kessler, and Carina Wallance, associates Richard Minott, Josefina Griot, Timothy Wolfe, and Lucas Davidenco, and law clerk Brendan Gerdts. The Cleary finance team included partner Duane McLaughlin, counsel Victor Chiu, associates Silvia Fittipaldi, Nicholas Pokas, Adrienne Lewis, Zhiyuan (Andy) Xie, David Rubinstein, and Cosmo Albrecht, and international lawyer Victor Barone. Partners Jorge Juantorena and Jonathan Mendes de Oliveira advised on securities law matters. Partner Matthew Brigham and associate Nathaniel Pribil advised on tax matters. Partner Julia Petty and associate Gretchen Dougherty advised on executive compensation and benefits matters. Partners Brian Byrne, Ryan Shores, and Puja Patel advised on antitrust matters.