Azul plans to raise funds

Azul plans to raise funds

Corporate & Sovereign Strategy Debt Equity Brazil US Coronavirus

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Brazilian airline Azul said it could raise funds to add to liquidity, although it claimed to have enough money to make it through the end of next year without additional capital.

"[S]ince there is still uncertainty in the recovery, the company plans to raise additional capital in due time to increase its liquidity cushion," Azul said in a securities filing on Sunday.

Azul also said it had BRL2.3 billion ($432 million) in cash and cash equivalents at the end of June this year, up from BRL2.2 billion at the end of March, despite going through cash at a rate of BRL3 million to BRL4 million per day in May.

Specifically, the airline had BRL1.6 billion in cash and BRL600 million in receivables at the end of June, compared to BRL1.3 billion in cash and BRL900 million in receivables at the end of March, according to the filing.

"Thanks to the support of our partners and the efforts of our crewmembers, we were able to increase the company's cash position during the second quarter of the year, which was without a doubt the most challenging in aviation history," CFO Alex Malfitani said in the filing.

Travel restrictions that were imposed at the start of the COVID-19 pandemic brought air traffic to a virtual standstill. S&P Global Ratings said in May that Azul could face a 50% drop in demand and keep 40% of its planes on the ground through the rest of the year. Azul said on Sunday, however, that it sees a "faster-than-expected ramp-up in capacity and demand."

The airline now expects to spend roughly BRL3 million in cash per day for the rest of the year, but it does not have any pending debt payments in 2020 "as a result of ongoing negotiations with its financial partners."

Along with competitors Gol Transportes Aéreos and LATAM Airlines, Azul signed up for BRL4 billion in emergency funding from a group of lenders led by Brazilian development bank BNDES.