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UPDATE 1-Brazil airline Azul mulls postponing IPO, source says
June 24, 2013 / 8:40 PM / 4 years ago

UPDATE 1-Brazil airline Azul mulls postponing IPO, source says

* IPO could be resumed if turmoil eases, source says

* Azul was expected to raise 1 billion reais in IPO

By Guillermo Parra-Bernal

SAO PAULO, June 24 (Reuters) - Azul Linhas Aéreas Brasileiras SA, Brazil’s third-biggest airline, is considering postponing an initial public offering that is scheduled for as early as next month due to adverse market conditions, a source with direct knowledge of the situation said on Monday.

The company could resume the plan later in the year should turmoil in global financial markets ease, said the source, who declined to be cited because the decision remains private.

The move comes just days after Votorantim Cimentos SA, Brazil’s leading cement producer, pulled its own IPO plan. Brazil is struggling with a stagnant economy and an ongoing exodus of investors from the local equities market.

An official announcement by Azul on a postponement could come within a week or so, the source said. The total size of the transaction was expected to reach about 1 billion reais ($450 million), sources told Reuters recently.

Officials from Azul could not be reached immediately for comment.

Azul had announced the IPO in May, under which it would sell 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 currently face a delicate balancing act, with the market offering investors attractive returns at a time when Latin America’s largest economy grapples with high inflation, rising risk aversion and flagging growth.

The benchmark Bovespa stock index has shed 23 percent this year, while the currency is down about 9 percent.

In addition to adverse market conditions, Votorantim Cimentos’ decision to pull its own listing plan last week came amid claims that the structure of the deal offered little transparency to foreign investors.

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.

Azul said in a recent securities filing that funds from the IPO were to 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 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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