(Image: iStock/Matheus Obst)
A Azul (AZUL4), which is in the midst of a short-term debt renegotiation, had its corporate rating downgraded from Caa1 to Caa2 by Moody's, according to a document sent to the market on Friday night (21).
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The outlook for issuers was also changed from positive to negative.
According to the rating agency, the downgrade reflects the weaker results the company recorded in 2024 and the resulting cash burn, which increased liquidity risks.
The agency recalls that Azul generated R$1.2 billion in Ebit during the first half of 2024, but high working capital needs, debt burden and capital expenditures led to an accumulated cash burn of R$1.2 billion in the same period.
As a result, Azul's cash position fell to R$1.4 billion at the end of June 2024, from around R$1.9 billion at the end of 2023. To make matters worse, the company has R$5.9 billion in financial and lease obligations maturing in the short term.
“Consequently, Azul’s liquidity risk has increased, and the company will need to seek additional renegotiations with lessors and additional financing to meet its liquidity needs,” it says.
Extra breath for Blue
Earlier this week, the airline confirmed that it is in negotiations with aircraft lessors. Among the terms being discussed is a replacement of US$580 million in debt with equity in the company.
According to a survey by Elos Ayta, Azul registered an appreciation of 54.2% in just three days, between the trading sessions of September 12 and 17, after reaching its lowest historical price.
Despite the recovery seen in recent days, AZUL4 remains 90% below its historical peak on January 28, 2020, when it reached R$62.41. Still, in the year to date, the shares have fallen 67%.
Moody’s se junta a S&P
Moody's wasn't the only one to cut the company's rating. Earlier this month, S&P Global Ratings cut its global issuer credit rating of Azul from B- to CCC+, with a negative outlook.
The change takes into account the airline's weaker-than-expected first-half results, widening the operating free cash flow deficit for the year and weakening liquidity.
The agency highlights that the depreciation of the real and the reduction in capacity and income harmed Azul's second-quarter results.
It all started with the news published by Bloomberg back in August that the company was considering several options — including filing for creditor protection — to deal with its imminently maturing debt.
However, the company denied that it had any plans for judicial recovery. This, however, was not enough to calm the markets, which sent the stock tumbling.