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

June 2, 2025

Cleary Gottlieb is representing 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 United States.

The group represents more than 65% of Azul’s total secured debt.

The ad hoc group, ultimately comprised of more than 20 leading financial institutions and some of the largest U.S.-based hedge funds, is a cross-holder group consisting of holders of Azul’s first-lien notes, second-lien notes, secured bridge notes, super senior notes, and secured convertible debentures.

This restructuring follows Cleary’s work representing Azul creditors in two previous out-of-court restructurings in which creditors reshaped the company’s balance sheet and provided over $750 million of new funding to the company. Despite those efforts, the company found itself unable to meet its ongoing liquidity challenges in April 2025 and in less than a month, Cleary, along with other bondholder advisors, helped structure, negotiate, and implement a comprehensive in-court restructuring.

The in-court Chapter 11 prearranged capital solution and restructuring included arrangements for:

  • Supporting a plan of reorganization that contemplates the equitization of all of the first-lien and second-lien debt of the company;
  • Providing approximately $1.6 billion in debtor-in-possession (DIP) financing, which will repay Azul’s most senior debt and provide Azul with approximately $670 million of new capital to bolster liquidity during the restructuring process;
  • Backstopping an equity rights offering of $650 million, which will be open to all equitizing first-lien and second-lien creditors at a 30% discount to plan value;
  • Negotiating a potential DIP-to-exit financing of between approximately $650 million to $1 billion to ensure Azul’s ability to exit Chapter 11 successfully;
  • Implementing comprehensive governance reforms and new management incentive plans; and
  • Facilitating a potential equity investment of up to $300 million from United Airlines and American Airlines in Azul.

Upon emergence from Chapter 11, it is anticipated that Azul’s 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 (or 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.