Fabio Falkenburger

Machado Meyer counsels on airline debt restructuring

Machado Meyer Advogados has counselled Aercap, Azorra Aviation, Avolon and Falko Aviation in the coordination and negotiation of all Brazilian legal aspects related to the debt restructuring of Azul Linhas Aéreas Brasileiras.

This is a complex and unprecedented debt restructuring involving multiple aircraft lessors, noteholders, new investors and aircraft and engine manufacturers. The agreement comprises: (i) The elimination of lease payment obligations that had been deferred during the Covid-19 pandemic; (ii) A permanent reduction of lease payments from original contractual rates; (iii) The deferral of certain payments to lessors and original equipment manufacturers (OEMs); (iv) A note exchange offer to optimise the company’s debt amortisation profile and capital structure; (v) The negotiation of a capital structure that will allow the conversion of some of the company’s lease debt into equity; (vi) Capital raising – new money.

This transaction is part of an ongoing restructuring plan designed to allow for the continuity of Azul’s operations in Brazil, and involved the Brazilian and US jurisdictions. Other participating firms were Pinheiro Neto Advogados, White & Case, and Shearman & Sterling. The first part of the transaction (closing of all relevant matters necessary for the exchange offer) was closed on 14 July.

The advisory work involved assisting clients in the renegotiation of aircraft lease debt, including the drafting and review of deferral and forbearance agreements. The firm also undertook the negotiation of all Brazilian legal aspects related to the capital structure being put in place to convert a portion of the lease debts into equity, allowing the airline to continue its regular operation in Brazil.

Machado Meyer’s team was led by partner Fabio Falkenburger (pictured), with support from partners Camilo Torres Gerosa Gomes and Gustavo Rugani Do Couto E Silva, and lawyers Alexandre SimÕes De Mello, Karina Ferraz Deorio, Ralff Barilli and Vitor Guilherme Da Silva Barbosa.

L Giselle Estrada