Azul Announces Exchange Offers of Certain Existing Notes for New Notes and Solicitations of Consents to Proposed Amendments to the Existing Indentures

SÃO PAULO, June 13, 2023 /PRNewswire/ -- Azul S.A., "Azul," (B3: AZUL4, NYSE: AZUL) ("Azul") today announced that its wholly-owned subsidiary Azul Investments LLP (the "Existing Notes Issuer") has commenced two separate offers to Eligible Holders (as defined below) to exchange (such offers, the "Exchange Offers") (i) any and all of the outstanding 5.875% Senior Notes due 2024 issued by the Existing Notes Issuer (the "Existing 2024 Notes") for newly issued 11.500% Senior Secured Second Out Notes due 2029 to be issued by Azul Secured Finance LLP (the "New Notes Issuer") (the "New 2029 Notes"), and (ii) any and all of the outstanding 7.250% Senior Notes due 2026 issued by the Existing Notes Issuer (the "Existing 2026 Notes" and, together with the Existing 2024 Notes, the "Existing Notes") for newly issued 10.875% Senior Secured Second Out Notes due 2030 to be issued by the New Notes Issuer (the "New 2030 Notes," and together with the New 2029 Notes, the "New Notes"), pursuant to the terms and subject to the conditions set forth in the confidential exchange offering memorandum and consent solicitation statement, dated June 13, 2023 in respect of the Exchange Offers and Solicitations (as defined below) (the "Offering Memorandum").

The New Notes will be guaranteed by Azul and its subsidiaries Azul Linhas Aéreas Brasileiras S.A. ("Azul Linhas"), IntelAzul S.A. and ATS Viagens e Turismo Ltda., as well as Azul IP Cayman Holdco Ltd. and Azul IP Cayman Ltd, which will be incorporated prior to the first Settlement Date (together, the "Guarantors"). The New Notes will be secured by certain assets and rights, as described in the Offering Memorandum.

Any capitalized terms used in this press release without definition have the respective meanings assigned to such terms in the Offering Memorandum.

Simultaneously with the Exchange Offers, the Existing Notes Issuer is conducting (i) a solicitation (the "2024 Solicitation") of consents (the "2024 Consents") from Eligible Holders of the Existing 2024 Notes to effect certain proposed amendments (the "2024 Proposed Amendments") to the indenture dated as of October 26, 2017, under which the Existing 2024 Notes were issued (the "2024 Notes Indenture"), and (ii) a solicitation (the "2026 Solicitation" and, together with the 2024 Solicitation, the "Solicitations") of consents (the "2026 Consents" and, together with the 2024 Consents, the "Consents") from Eligible Holders of the Existing 2026 Notes to effect certain proposed amendments (the "2026 Proposed Amendments" and, together with the 2024 Proposed Amendments, the "Proposed Amendments") to the indenture dated as of June 15, 2021, under which the Existing 2026 Notes were issued (the "2026 Notes Indenture" and, together with the 2024 Notes Indenture, the "Existing Notes Indentures"). The Proposed Amendments with respect to each Existing Notes Indenture would, among other things, eliminate substantially all of the restrictive covenants, events of default and related provisions contained in such Existing Notes Indenture. Eligible Holders may not tender their Existing Notes for exchange pursuant to the applicable Exchange Offer without delivering their Consents pursuant to the applicable Solicitation, and Eligible Holders may not deliver their Consents pursuant to the applicable Solicitation without tendering their Existing Notes pursuant to the applicable Exchange Offer. The valid tender of Existing Notes of a series by an Eligible Holder pursuant to the relevant Exchange Offer will be deemed to constitute the giving of a Consent by such Eligible Holder to the Proposed Amendments of the Existing Notes Indenture applicable to such series.

Azul has entered into a Transaction Support Agreement (the "Transaction Support Agreement") dated June 13, 2023, between the New Notes Issuer, the Guarantors and an ad hoc group of holders of Existing Notes (the "Supporting Noteholders"). Subject to the terms and conditions set forth in the Transaction Support Agreement, the Supporting Noteholders have agreed to tender their Existing Notes in the Exchange Offers and deliver Consents to the Proposed Amendments prior to the Early Participation Deadline. The Supporting Noteholders represent 65.5% of the aggregate principal amount of the Existing 2024 Notes and 65.8% of the aggregate principal amount of the Existing 2026 Notes outstanding as of the date of this press release. The consent of Supporting Noteholders suffices to approve the Proposed Amendments in respect of the Existing Notes of each series.

Each Exchange Offer and Solicitation is a separate offer, and each Exchange Offer and Solicitation may be individually amended, extended, terminated or withdrawn without amending, extending, terminating or withdrawing any other Exchange Offer or Solicitation, at any time prior to the Expiration Deadline and for any reason. As described in the Offering Memorandum, the New Notes will constitute Second Priority Secured Obligations and will, pursuant to the Intercreditor Agreement, be secured on a "second out" basis by security interests in the Collateral.

Upon the terms and subject to the conditions set forth in the Offering Memorandum, Eligible Holders who validly tender Existing Notes and deliver related Consents at or prior to 5:00 p.m., New York City time, on June 27, 2023, unless extended by the Existing Notes Issuer (such date and time as they may be extended, the "Early Participation Deadline") and who do not validly withdraw tendered Existing Notes and do not revoke such Consents at or prior to 5:00 p.m., New York City time, on June 27, 2023, unless extended by the Existing Notes Issuer (such date and time, as they may be extended, the "Withdrawal Deadline"), and whose Existing Notes are accepted for exchange by the Existing Notes Issuer, will receive the applicable Total Early Exchange Consideration, which will be payable in the forms of consideration described below.

The "Total Early Exchange Consideration" for any Existing 2024 Notes and Existing 2026 Notes whose tenders are accepted for exchange by the Existing Notes Issuer will consist of New 2029 Notes to be issued by the New Notes Issuer and New 2030 Notes to be issued by the New Notes Issuer, respectively, in an aggregate principal amount set forth in the above table, which includes the "Early Exchange Premium" for Existing Notes set forth in the above table.

Upon the terms and subject to the conditions set forth in the Offering Memorandum, Eligible Holders who validly tender Existing Notes and deliver related Consents after the Early Participation Deadline but at or prior to 11:59 p.m., New York City time, on July 12, 2023, unless extended or earlier terminated by the Existing Notes Issuer (such date and time, as they may be extended, the "Expiration Deadline"), and whose Existing Notes are accepted for exchange by the Existing Notes Issuer, will receive the applicable Total Early Exchange Consideration minus the applicable Early Exchange Premium (the "Exchange Consideration").

Upon the terms and subject to the conditions of the relevant Exchange Offer, the settlement date for an Exchange Offer will occur promptly after the applicable Expiration Deadline (the "Final Settlement Date"). If, at any time on or after the Early Participation Deadline, all conditions have been satisfied or waived by the Existing Notes Issuer, the Existing Notes Issuer may elect, in its sole discretion, to settle an Exchange Offer for Existing Notes of the relevant series validly tendered (and not validly withdrawn) prior to the Early Participation Deadline for such Exchange Offer at any time after the Early Participation Deadline and prior to the applicable Expiration Deadline (the "Early Settlement Date" and, together with the Final Settlement Date, each a "Settlement Date").

If the Existing Notes Issuer elects to have an Early Settlement Date in respect of Existing Notes of a series, the Early Settlement Date will be determined at the Existing Notes Issuer's option and announced by the Existing Notes Issuer. The Final Settlement Date is expected to be July 17, 2023 unless extended by the Existing Notes Issuer (at its sole option), which is the third business day following the Expiration Deadline.

In addition to the applicable Total Early Exchange Consideration or applicable Exchange Consideration, as applicable, Eligible Holders whose Existing Notes are accepted for exchange by the Existing Notes Issuer will be paid in cash the accrued and unpaid interest, if any, from the last payment date for the Existing Notes of the relevant series up to, but not including, the applicable Settlement Date for such Existing Notes that are validly tendered and accepted for exchange by the Existing Notes Issuer on the applicable Settlement Date.

If the Existing Notes Issuer elects to have an Early Settlement Date in respect of Existing Notes of a series, the interest commencement date for the New Notes of the relevant series shall be such Early Settlement Date. Therefore, any such New Notes issued by the New Notes Issuer on the applicable Final Settlement Date will be issued by the New Notes Issuer with accrued and unpaid interest from such Early Settlement Date. Accordingly, the amount of accrued and unpaid interest that has accrued on such New Notes to, but excluding, the applicable Final Settlement Date will be deducted, but not below zero, from the cash payable in respect of accrued and unpaid interest, if any, on the Existing Notes of the relevant series exchanged on the applicable Final Settlement Date.

The obligation of the Existing Notes Issuer to complete an Exchange Offer and related Solicitation with respect to either series of Existing Notes is subject to certain conditions described in the Offering Memorandum (the "Conditions"), which include, (i) with respect to the 2024 Notes, the receipt of 2024 Notes validly tendered (and not validly withdrawn) prior to the Expiration Deadline representing not less than 70% of the aggregate principal amount of 2024 Notes outstanding and, with respect to the 2026 Notes, the receipt of Existing Notes validly tendered (and not validly withdrawn) prior to the Expiration Deadline representing not less than 70% of the aggregate principal amount of Existing Notes outstanding, (ii) certain amendments to the indenture (escritura de emissão de debêntures) governing the convertible debentures issued by Azul and certain collateral and other documents are required to be amended or replaced in respect of such convertible debentures, (iii) certain amendments to the forbearance agreement entered into between Azul Linhas, as lessee, and certain lessors of aircraft (the "Relevant Lessors"), and to the global partial deferral agreement entered into between Azul Linhas, as lessee, Azul, as guarantor, and the Relevant Lessors, and the related collateral and other documents are required to be replaced, (iv) the obtaining by Azul and certain of its subsidiaries of waivers and amendments from their creditors to certain financings agreements and arrangements entered into in the ordinary course of their business with certain financial institutions, and (v) certain other customary conditions. Certain of these conditions are subject to waiver by Azul.

Pursuant to the terms of each Existing Notes Indenture, the Proposed Amendments require the written consent of holders of a majority in aggregate principal amount of the relevant series of outstanding Existing Notes issued under the relevant Existing Notes Indenture. At any time after the applicable Withdrawal Deadline and before the applicable Final Settlement Date (or the Early Settlement Date, if the Existing Notes Issuer elects to have an Early Settlement Date in respect of Existing Notes of a series), upon receipt of valid Consents sufficient to effect the Proposed Amendments with respect to Existing Notes of a series, the Existing Notes Issuer and the relevant Existing Notes Trustee under the applicable Existing Notes Indenture may execute and deliver a supplemental indenture relating to the Proposed Amendments with respect to the applicable Existing Notes Indenture immediately giving effect to such Proposed Amendments.

Neither the Existing Notes Issuer nor the New Notes Issuer will receive any cash proceeds from the Exchange Offers or the issuance of the New Notes to be issued by the New Notes Issuer in the Exchange Offers. The Existing Notes acquired by the Existing Notes Issuer pursuant to the Exchange Offers will be cancelled and will not be reissued.

The New Notes are being offered for exchange only (a) in the United States to holders of Existing Notes who are reasonably believed to be "qualified institutional buyers" (as defined in Rule 144A under the Securities Act of 1933, as amended (the "Securities Act")) in reliance upon the exemption from the registration requirements of the Securities Act, and (b) outside the United States to holders of Existing Notes who are persons other than "U.S. persons" (as defined in Rule 902 under the Securities Act) in reliance upon Regulation S under the Securities Act. In addition, the New Notes may not be transferred to or held by a Competitor.

Only holders of Existing Notes who have properly completed and submitted the eligibility certification in electronic form (the "Eligible Holders") are authorized to receive and review the Offering Memorandum. Only Eligible Holders that also comply with the other requirements set forth in the Offering Memorandum are eligible to participate in the Exchange Offers and the Solicitations. Holders who desire to obtain and complete an eligibility certification should either visit the website for this purpose at https://gbsc-usa.com/eligibility/azul or contact Global Bondholder Services Corporation, the Exchange Agent and the Information Agent in connection with the Exchange Offers and the Solicitations. Requests for documentation and questions regarding the Exchange Offers and the Solicitations can be directed to Global Bondholder Services Corporation at +1 (212) 430-3774 (banks and brokers) and +1 (855) 654–2014 (toll free).

This press release does not constitute an offer to buy or the solicitation of an offer to sell the Existing Notes in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. This press release does not constitute an offer to sell or the solicitation of an offer to buy the New Notes, nor shall there be any sale of the New Notes in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. The New Notes will not be registered under the Securities Act or the securities laws of any state and may not be offered or sold in the United States absent registration or an exemption from the registration requirements of the Securities Act and applicable state securities laws. The Exchange Offers and Solicitations are being made only pursuant to the Offering Memorandum and only to such persons and in such jurisdictions as is permitted under applicable law.

None of the Existing Notes Issuer, the New Notes Issuer, the Guarantors, any of their respective directors or officers, the Dealer Managers, the Financial Advisor, the Exchange Agent, the Information Agent, or the Trustees, or in each case, any of their respective affiliates, makes any recommendation as to whether Eligible Holders should tender or refrain from tendering all or any portion of the Existing Notes in response to any of the Exchange Offers, or deliver Consents in response to the Solicitations. Eligible Holders will need to make their own decision as to whether to tender Existing Notes in the Exchange Offers and participate in the Solicitations and, if so, the principal amount of Existing Notes to tender.

This press release is being issued pursuant to and in accordance with Rule 135c under the Securities Act.

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this press release, and those statements preceded by, followed by or that otherwise include the words "may," "might," "will," "aim," "would," "could," "should," "believe," "understand," "expect," "anticipate," "intend," "estimate," "project," "target," "goal," "guidance," "budget," "plan," "objective," "potential," "seek," or similar expressions or variations on these expressions are forward-looking statements. Azul and its subsidiaries can give no assurances that the assumptions upon which the forward-looking statements are based will prove to be correct or that, even if correct, intervening circumstances will not occur to cause actual results to be different than expected. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause the actual results of Azul and its subsidiaries to differ materially from the forward-looking statements, including, but not limited to, the form and results of the Exchange Offers and Solicitations; the satisfaction or waiver of the Conditions; and those factors set out in the Offering Memorandum under "Risk Factors", in Azul's annual report on Form 20-F for the year ended December 31, 2022 under "Risk Factors", and in Azul's other filings with the U.S. Securities and Exchange Commission. Although Azul and its subsidiaries believe the expectations reflected in the forward-looking statements are reasonable, Azul and its subsidiaries cannot guarantee future results, level of activity, performance or achievements. Moreover, neither Azul nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. Eligible Holders should not rely upon forward-looking statements as predictions of future events. The information included herein is given as of the date of this press release and, except as otherwise required by the applicable law, Azul and its subsidiaries disclaim any obligation or undertaking to publicly release any updates or revisions to, or to withdraw, any forward-looking statement contained in this press release to reflect any change in Azul's and its subsidiaries' expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based.

Azul is the largest airline in Brazil in terms of departures and cities served, with around 1,000 daily departures to 158 destinations, creating an unparalleled network of more than 300 non-stop routes as of December 31, 2022. For more information visit https://ri.voeazul.com.br. Information on Azul's website does not constitute a part of this press release.

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SOURCE Azul S.A.