Fixed Income Analysis /

AZUL INVESTMENTS: Hit by a triple whammy of external factors, but bonds are cheap and company is strong. BUY

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    28 June 2018
    Published byTellimer Research
    Azul Investments LLP (AZULBZ)’s US$400mn, 5.875% bonds due 2024 (B1/B+/NR) are currently trading at cUS$86.18 to yield c8.76% (G-Spread 599bps; Z-Spread 589bps). This is down from the high of US$100.162 registered on 1 November 2017, with the substantial drop in prices beginning around 15 April 2018 due to a triple whammy of:1) higher jet fuel prices; 2) the depreciation of the BRL; and 3) the national truckers’ strike that affected the supply of fuel at Brazilian airports. We believe that at current levels Azul bonds are cheap, with limited further downside and an attractive carry.