(Bloomberg) -- Azul SA’s efforts to raise $400 million in fresh debt have hit a snag, with the troubled Brazilian airline rushing to raise the cash it needs to meet a key condition of its deal with aircraft lessors, according to people familiar with the matter.
Jefferies Financial Group had been reaching out to potential investors to help Azul raise cash through the sale of new debt that can be converted to equity, the people said, asking not to be named discussing private details. But the bank has so far come up short of the full amount, the people said. The struggling air carrier is now focused on negotiations with its bondholders to secure financing.
An Azul spokesperson declined to comment. Jefferies did not immediately respond to a request for comment.
Azul this month sealed a deal with lessors and parts suppliers that would reduce its debt by 3 billion reais ($530 million) in exchange for 100 million new preferred shares. But the agreement is contingent on the company to obtaining the new financing Jefferies has been trying to arrange.
Raising fresh capital is crucial to bolstering Azul’s cash position and addressing near-term refinancing needs. The company has struggled with high interest rates, volatile fuel costs and a weaker Brazilian real. The exchange rate variation has made its gross debt swell, while the closing of a key airport in Brazil’s south dragged on earnings.
Bloomberg reported in August that Azul has weighed options including a follow-on equity offering and filing for Chapter 11 to tackle its debt obligations. Following the report, the company said in a regulatory filing that it was analyzing options, including raising debt using its cargo unit as collateral, and that it preferred “commercial solutions.”
About $68 million comes due in bond payments this month, according to Moody’s Ratings, an amount analysts have said the company can manage. As of June 30, Azul had 1.5 billion reais of debt maturing in the short term and around 1.4 billion reais of readily available cash, according to Fitch Ratings.
Azul is the only carrier of the three that dominate Latin America’s largest air travel market to have avoided filing for bankruptcy protection. But it has faced difficulties in shoring up its balance sheet, despite having renegotiated with lessors and completing a bond swap that pushed back maturities to at least 2028.
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