Azul - Chapter 11 Plan Terms

RSA Terms

Overview

• The Debtors have entered into three distinct Restructuring Support Agreements (collectively, the “RSAs”) to facilitate their Chapter 11 restructuring:
  • The “AerCap RSA” with AerCap Ireland Limited and supporting creditors;
  • The “Bondholder RSA” with Consenting Shareholders and Stakeholders; and
  • The “Strategics RSA” with Consenting Strategic Partners.
• The RSAs contemplate a restructuring based on a “Plan Equity Value” of $1.68 billion.
  • This valuation is premised on an Equity Rights Offering (ERO) amount of at least $850 million and is subject to adjustment based on the final ERO amount raised.

RSA Parties

• Key counterparties to the RSAs include:
  • Secured Ad Hoc Group: Holders of DIP Notes, 1L Notes, 2L Notes, and Convertible Debentures.
  • Strategic Partners: United Airlines, Inc. and American Airlines, Inc. (or their affiliates).
  • AerCap: AerCap Ireland Limited and affiliates.
  • Significant Shareholders: David Gary Neeleman, José Mario Caprioli dos Santos, Trip Participações S.A., Trip Investimentos S.A., and Rio Novo Locações Ltda.
  • Backstop Commitment Parties: Parties backstopping the ERO pursuant to the Backstop Commitment Agreement.

DIP and Exit Financing

• DIP Facility: The Debtors are utilizing a senior, secured, superpriority, priming DIP Facility.
  • DIP Claims include “Rolled-Up AerCap Secured Claims” and “Rolled-Up Convertible Debenture Claims.”
  • On the Effective Date, Allowed DIP Facility Claims will be satisfied via:
    • Cash: Payment from the Adjusted Exit Financing Cash Amount; or
    • ERO Convenience Election: Holders may elect to use their cash distribution to satisfy subscription obligations for ERO Shares on a dollar-for-dollar basis; or
    • Exit Notes: A cashless settlement converting outstanding DIP principal, interest, and fees into Exit Notes.
• Exit Financing: Upon emergence, the Reorganized Debtors will enter into “Exit Debt Facilities,” which may consist of:
  • Exit Notes: New first lien secured notes issued by the Exit Notes Issuer; or
  • Other Exit Financing: Alternative new financing incurred on the Effective Date.

Equity Rights Offering (ERO)

• The Plan contemplates an ERO raising up to $950 million in new capital, comprised of:
  • Backstopped ERO Amount: $650 million, fully backstopped by the Backstop Commitment Parties (includes a $50 million mandatory “ERO Holdback”).
  • Strategics Investment Amount: A minimum of $200 million from the Strategic Partners.
  • Additional Investment Amount: Any applicable incremental investment.
• Backstop Consideration: In exchange for their commitments, Backstop Commitment Parties will receive:
  • A “Backstop Payment” equal to 14.0% of the Backstopped ERO Amount, payable in New Equity Interests calculated at the applicable discount to Plan Equity Value.

Treatment of Claims

• Secured Claims:
  • 1L Claims: Holders will receive their pro rata share of 97.0% of the Effective Date New Equity Interests and 1L Subscription Rights.
  • 2L Notes Claims: Holders will receive their pro rata share of 3.0% of the Effective Date New Equity Interests and 2L Subscription Rights.
  • Note: New Equity Interests are subject to dilution by the ERO Shares, Backstop Payment Securities, GUC Warrants, MIP Interests, and other potential issuances.
  • To implement the transaction, 1L and 2L Holders will be deemed to contribute their claims to specific “Creditors’ Entities” in exchange for the New Equity distributions.
• General Unsecured Claims (GUCs): Holders of Allowed GUCs must elect between two recovery options:
  • Cash-Out Pool: A pro rata share of a cash pool of up to $20 million; or
  • GUC Trust Election: A pro rata share of interests in the GUC Trust.
  • Exclusions: Holders of 1L or 2L Deficiency Claims are not eligible for GUC recoveries. AerCap has waived rights to distributions on approximately $284.8 million of unsecured claims against ALAB and all guarantee claims against Azul.
• Convenience Class: Claims at or below the Convenience Claim Amount will receive a pro rata share of the Unsecured Convenience Class Cash Pool.

GUC Trust Assets

• The GUC Trust will be established to administer specific assets for beneficiaries who make the GUC Trust Election, including:
  • GUC Warrants: Warrants to purchase up to 5.5% of the total outstanding New Equity Interests.
    • Terms: 5-year exercise period; strike price based on a $3.8 billion equity value; Black-Scholes protection for 3 years; cashless exercise feature.
  • GUC CVRs: Contingent Value Rights providing for annual cash payments of up to $6.5 million for fiscal years 2027, 2028, and 2029.
    • Payment is contingent upon the Reorganized Debtors achieving at least 100% of projected EBITDAR for the applicable year.

Releases and Management Incentive Plan

• Releases: The Plan provides for releases of the Debtors, Reorganized Debtors, RSA parties, and Committee members.
  • Holders may “opt out” of the releases by checking a box on their ballot or filing an objection.
  • However, parties to the RSAs are prohibited from opting out.
• Management Incentive Plan (MIP): The Plan establishes a MIP pool comprising 7.0% of the New Equity Interests.
  • 1.0% vests immediately upon approval; the remaining balance is to be allocated by the New Azul Strategy Committee.