LOANS AND FINANCING | LOANS AND FINANCING 18.1 Accounting policies Loans and financing are initially recognized at fair value less any directly attributable transaction costs. After initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. 18.2 Movement of loans and financing Description Average nominal rate p.a. Effective rate Maturity December 31, Funding Transfers (a) Payment of principal Payment of interest Interest incurred Foreign currency exchange Effects of restriction (b) Amortized cost December 31, Principal payable Interest Payable Amortized cost December 31, In foreign currency – US$ Senior notes – 2024 5.9 % 6.3 % Oct-24 2,097,402 — (1,596,972) — (92,985) 76,569 (157,024) 1,212 3,897 332,099 329,472 3,441 (814) 332,099 Senior notes – 2026 7.3 % 7.8 % Jun-26 3,095,665 — (2,725,010) — (126,950) 121,218 (253,595) 34,278 6,966 152,572 153,701 464 (1,593) 152,572 Senior notes – 2028 11.9 % 13.5 % Aug-28 — 3,643,382 186,005 — (173,450) 218,885 31,138 — 16,771 3,922,731 4,051,093 42,960 (171,322) 3,922,731 Senior notes – 2029 11.5 % 11.5 % May-29 — — 1,410,967 (277,961) (52,893) 65,165 20,267 — — 1,165,545 1,153,751 11,794 — 1,165,545 Senior notes – 2030 10.9 % 10.9 % May-30 — — 2,725,010 — (112,453) 140,308 24,648 — — 2,777,513 2,750,921 26,592 — 2,777,513 Aircraft, engines and others 6.5 % 9.3 % Mar-29 731,224 — (1,067) (402,994) (42,727) 47,720 (53,401) — 5,524 284,279 283,965 1,808 (1,494) 284,279 Sofr 1M + 4.6% 10.0 % May-26 — 79,222 — — — 196 (332) — — 79,086 78,890 196 — 79,086 5,924,291 3,722,604 (1,067) (680,955) (601,458) 670,061 (388,299) 35,490 33,158 8,713,825 8,801,793 87,255 (175,223) 8,713,825 In local currency – R$ Working capital CDI + 3.1 % CDI +3,1 % Feb-24 496,997 301,098 — (770,795) (59,807) 58,454 — — 1,544 27,491 27,190 301 — 27,491 Sep-25 2,675 — — (546) (155) 183 — — — 2,157 2,157 — — 2,157 — Debentures CDI + 5.4 % 16.3 % Dec-28 747,170 585,661 — (431,530) (123,907) 131,629 — — 10,049 919,072 913,521 28,409 (22,858) 919,072 — Aircraft, engines and others Selic +5.5 % 17.4 % May-25 19,284 — — (4,697) (4,714) 2,868 — — 30 12,771 12,851 — (80) 12,771 6.3 % 6.3 % Mar-27 42,282 — — (18,600) (2,111) 1,912 — — 113 23,596 23,596 — — 23,596 — 1,308,408 886,759 — (1,226,168) (190,694) 195,046 — — 11,736 985,087 979,315 28,710 (22,938) 985,087 Total in R$ 7,232,699 4,609,363 (1,067) (1,907,123) (792,152) 865,107 (388,299) 35,490 44,894 9,698,912 9,781,108 115,965 (198,161) 9,698,912 Current 1,112,940 1,100,051 1,100,051 Non-current 6,119,759 8,598,861 8,598,861 (a) The balance of transfers are between “Loans and financing” and “Leases”. (b) Refers mainly to the acceleration of the amortization of funding costs considered extinguished in accordance with the requirements of paragraph 3.3.2 of IFRS 9 – Financial instruments, which determines that a substantial modification of the terms of a debt instrument, or a portion thereof, will be accounted for with an extinguishment of such instrument. Description Average nominal rate p.a. Effective rate Maturity December 31, Funding Payment of principal Payment of interest Interest incurred Foreign currency exchange Amortized cost December 31, 2022 Principal payable Interest accrued Amortized cost December 31, 2022 In foreign currency – US$ Senior notes – 2024 5.9 % 6.3 % Oct-24 2,236,910 — — (120,924) 120,487 (146,308) 7,237 2,097,402 2,087,079 21,798 (11,475) 2,097,402 Senior notes – 2026 7.3 % 7.8 % Jun-26 3,298,018 — — (227,525) 222,675 (208,927) 11,424 3,095,665 3,130,620 9,457 (44,412) 3,095,665 Aircraft and engines 6.0 % 9.3 % Mar-29 1,096,955 — (306,668) (43,061) 52,940 (74,467) 5,525 731,224 733,697 4,669 (7,142) 731,224 Libor 3M + 2.6 % Libor 3M + 2.6 % Mar-22 1,561 — (1,428) — 6 (139) — — — — — — 6,633,444 — (308,096) (391,510) 396,108 (429,841) 24,186 5,924,291 5,951,396 35,924 (63,029) 5,924,291 In local currency – R$ Working capital CDI +3.9 % 18.6 % Feb-24 643,699 227,467 (369,623) (108,887) 104,030 — 311 496,997 495,631 1,798 (432) 496,997 2.9 % 2.9 % Sep-25 23,202 — (20,728) (1,031) 1,232 — — 2,675 2,648 27 — 2,675 Debentures (a) CDI + 5.0 % 16.3 % Dec-27 733,017 (12,308) (74,056) (50,908) 147,029 — 4,396 747,170 694,921 70,820 (18,571) 747,170 Aircraft and engines Selic + 5.5 % 17.4 % May-25 28,038 — (8,350) (4,374) 3,910 — 60 19,284 19,386 18 (120) 19,284 6.2 % CDI + 6.2 % Mar-27 84,330 — (42,324) (3,863) 4,017 — 122 42,282 42,397 7 (122) 42,282 1,512,286 215,159 (515,081) (169,063) 260,218 — 4,889 1,308,408 1,254,983 72,670 (19,245) 1,308,408 Total in R$ 8,145,730 215,159 (823,177) (560,573) 656,326 (429,841) 29,075 7,232,699 7,206,379 108,594 (82,274) 7,232,699 Current 984,266 1,112,940 1,112,940 Non-current 7,161,464 6,119,759 6,119,759 (a) The amount of R$12,308 refers to costs to be amortized due to the renegotiation of the debentures. 18.3 Schedule of amortization of long-term debt December 31, Description 2023 2022 2023 — 1,112,940 2024 1,100,051 2,397,036 2025 222,201 234,919 2026 355,930 3,306,081 2027 116,146 172,205 After 2027 7,904,584 9,518 9,698,912 7,232,699 Current 1,100,051 1,112,940 Non-current 8,598,861 6,119,759 18.4 Main loan and financing operations 18.4.1 Funding occurred in 2023 18.4.1.1 Working capital During the first quarter, the Company raised R$302,252 at costs of R$1,154, a rate equivalent to CDI+6.4% p.a. and a single payment of interest and principal in June 2023. During the second quarter, the payment deadline was postponed to September 2023 and the interest rate was postponed to CDI+6.5% p.a. In July 2023 the balance was paid in advance. 18.4.1.2 Debentures During the second quarter, the Company granted the 11th issue of simple debentures, not convertible into shares, of the type with real guarantee, with additional personal guarantee, in a single series, in the principal amount of R$600,000, with a nominal unit face value of R$1, costs of R$11,872, rate equivalent to CDI+6.0% p.a. and maturity in June 2024. Interest will be amortized monthly. The resources were fully and exclusively used to pay for the supply aircraft fuel. 18.4.1.3 Senior notes 2028 In July 2023, the Company completed a private offering of senior debt securities for a principal amount of R$3,831,040, (equivalent to US$800,000), costs funding were from R$187,658, with interest of 11.9% p.a. paid quarterly starting in November 2023 and principal due in August 2028. The net proceeds will be used to pay certain debts, obligations and other corporate purposes. In October 2023, the Company issued additional notes for a principal amount of R$186,005 (equivalent to US$36,778). Such notes were issued in exchange for the aggregate principal amount of R$190,819 (equivalent to US$37,730) of the Senior Notes 2024. 18.4.1.4 Aircraft and engines In November 2023, the Company financed R$79,222, with interest of 4.6%p.a. plus the variation in the Secured Overnight Financing Rate (“SOFR”) and maturity in May 2026. 18.4.2 Renegotiations occurred in 2023 18.4.2.1 Debentures During the first quarter, the Company renegotiated the terms of the debentures, with a principal amount of R$700,000, costs of R$2,467 in order to extend the maturity date from December 2027 to December 2028. There was no change in interest rates. In accordance with IFRS 9 – Financial Instruments, the Company concluded that the renegotiation does not fall within the scope of debt extinguishment. For this reason, any costs or fees incurred were deducted from the debt balance. 18.4.2.2 Aircraft and engines During the first quarter, the Company renegotiated the deferral of the payment from March 31, 2023 to December 31, 2023 of an installment in the amount of R$194,330, changing the weighted average rate from 6.5% p.a. to 7.4% p.a. Linked to this renegotiation, in the second quarter, the weighted average rate of the entire contract was renegotiated, changing from 7.4% p.a. to 8.6% p.a. In December 2023 the balance was paid in advance. In accordance with IFRS 9 - Financial Instruments, the Company concluded that the renegotiation does not fall within the scope of debt extinguishment. For this reason, any costs or fees incurred were deducted from the debt balance. 18.4.2.3 Senior notes In June, 2023, the Company announced its subsidiary Azul Investments issued: • an offer exchange debt securities with interest of 5.9% p.a due 2024 (Senior Notes 2024) for debt securities with interest of 11.5% p.a. due 2029; and • an offer to exchange debt securities with interest of 7.3% p.a due 2026 (Senior Notes 2026) for debt securities with interest of 10.9% p.a. due 2030. In July and October 2023, the Company concluded its exchange offers and as a consequence issued: • R$1,410,967 (equivalent to US$294,215) in principal amount with interest of 11.5% p.a. due 2029 (which were issued in exchange for R$1,410,967 (equivalent to US$294,215) in aggregate principal amount of the Senior Notes 2024); • R$2,725,010 (equivalent to US$568,219) in the principal amount with interest of 10.9% p.a. maturing in 2030 (which were issued in exchange for R$2,725,166 (equivalent to US$568,252) in the principal amount of the Senior Notes 2026); and. • R$186,005 (equivalent to US$36,778) in principal amount with interest of 11.5% p.a. due 2028 (which were issued in exchange for R$190,819 (equivalent to US$37,730) in aggregate principal amount of Senior Notes 2024); In total, 90.0% of the principal value of the 2024 and 2026 Senior Notes was exchanged for 2028 and 2030 debt securities, as shown below: Description Total principal amount offered for exchange US$ % exchanged 5.9% Senior notes 2024 331,945 83.0 % 7.3% Senior notes 2026 568,252 94.7 % Total 900,197 90.0 % Due to debt renegotiations, the amount of R$199,635 was recorded in the statements of operations, under the line “Debt restructuring”. The amount refers to R$35,490 of the effects of extinguishing the debt and R$164,145 of new costs incurred, not capitalized as it concerns the extinguishment of the original debts. 18.5 Covenants As of December 31, 2023, the Company has loans and financing subject to covenants related to the indebtedness level and the debt service coverage ratio. Covenant related to: Restrictive clause Frequency of measurement Indicators for the measurement Reached 9th and 10th issue of debentures Annual (i) Adjusted debt service coverage ratio (DSCR). (i) equal to or greater than 1.2 (ii) less than or equal to 6.5 in 2023; 5.0 in 2024 and 2025; and 4.5 in 2026 and 2027. Waiver 11th issue of debentures Annual (i) index obtained by adjusted net debt/adjusted EBITDA. (i) financial leverage less than or equal to 3.75%.as of December 31, 2023 Reached Aircraft financing Annual (i) Adjusted debt service coverage ratio (DSCR); and (i) equal to or greater than 1.2; and (ii) less than or equal to 6.5. Waiver Engine maintenance financing Quarterly/Annual (i) Adjusted debt service coverage ratio (DSCR); and (i) equal to or greater than 1.2; and (ii) less than or equal to 5.5. Waiver The Company requested waivers from its counterparties, and obtained them for the year ended December 31, 2023. Therefore, the related debt is classified in these financial statements in accordance with the contractual flow originally established. 18.6 Guarantees The package of guarantees for the debt renegotiations and the issuance of Senior Notes 2028, which took place during 2023, consists of the fiduciary assignment of the flow of receivables from Azul Viagens and the loyalty program and the fiduciary sale of the loyalty program's intellectual property. The Senior Notes 2028 and the Convertible Debentures are guaranteed in the first degree and the Senior Notes 2029 and 2030 are guaranteed in the second degree. |