August 20, 2013 / 12:30 AM / 4 years ago

Brazil airline Azul scraps IPO, cites adverse market conditions

* Azul to monitor markets to reconsider IPO in the future

* Azul was expected to raise 1 billion reais in IPO

By Juliana Schincariol

RIO DE JANEIRO, Aug 19 (Reuters) - Azul Linhas Aéreas Brasileiras SA, Brazil’s third-biggest airline, on Monday said it gave up plans for an initial public offering due to adverse market conditions.

The company said in a statement, however, that it still intends to launch an IPO in the future and that it will keep monitoring markets to find the best moment to do so.

Sources had told Reuters in June that Azul was considering postponing its IPO as investors became more averse to taking risk in Brazilian markets.

The total size of the transaction had been expected to reach about 1 billion reais ($414 million), according to sources.

Azul had announced the IPO in May, under which it would have sold stock in a primary offering to raise funds for corporate purposes, with shareholders partially exiting their stake in the company through a so-called secondary offering.

Stock market newcomers in Brazil face a difficult environment as investors grow increasingly disappointed with the country’s high inflation rates and faltering economic growth.

The benchmark Bovespa stock index has shed 15 percent so far this year, while the currency is also down about 15 percent.

Azul said in a recent securities filing that funds from the IPO would be used to purchase new planes, add routes and reinforce working capital. Part of the proceeds would be used to pay off some loans and make lease payments on five aircraft.

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.

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.

The company had 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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