May 27, 2013 / 7:00 PM / in 5 years

UPDATE 1-Brazil's Azul airline plans IPO to fund expansion, repay debt

* Azul plans double listing in Brazil, United States

* To use proceeds to purchase new planes, add routes

SAO PAULO, May 27 (Reuters) - Azul Linhas Aéreas Brasileiras SA, Brazil’s third-biggest airline, plans to list its stock in Brazil and in the United States to bolster expansion in what might be the first initial public offering for a local airline since 2005.

The company will sell stock in a so-called primary offering, by which Azul will raise funds for corporate purposes, with shareholders partially exiting their stake in the company through a so-called secondary offering, the company said in a securities filing on Monday. The IPO includes the sale of U.S.-traded shares in the form of American Depositary receipts.

The total size of the transaction could reach about 1 billion reais ($487.8 million), according to IFR, a Thomson Reuters service specialized in the coverage of capital markets. Spokespeople at the Barueri, Brazil-based company were unable to confirm terms of the offering, citing a quiet period imposed by Brazil’s securities regulator.

Funds from the IPO will be used to purchase new planes, add routes and reinforce working capital, the filing added. The company will also use part of the proceeds to pay off some loans and make lease payments on five aircraft.

Azul’s fleet, which numbered 55 planes as of last year, is largely composed of E190 and E195 jets made by Brazil’s Embraer SA.

Azul, founded by Brazilian-born entrepreneur David Neeleman, competes against LATAM Airlines Group and Gol Linhas Aereas Inteligentes SA by offering low fares and direct routes between under served cities. It is the fourth low-cost airline launched by Neeleman, who is best known for founding U.S. carrier JetBlue Airways Corp.

In the year through May, companies in Brazil raised 14.9 billion reais through IPOs. Stung by a string of deals that failed to deliver on promised returns, investors have been cautious with share offerings in the country. In 2012, Brazil’s IPO activity was the slowest in seven years.

Among Azul partners are Gávea Investimentos, the Rio de Janeiro-based asset management company controlled by JPMorgan Chase & Co. and U.S. private equity firm TPG.

Azul hired the investment banking units of Banco Santander Brasil, Banco do Brasil SA, Itaú Unibanco Holding SA and Morgan Stanley & Co to handle the deal.

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