The Brazilian aviation sector has been severely impacted by the COVID-19 pandemic, causing a disproportionate decrease in revenues and costs of -53.4% and -31.5%, respectively, according to the National Civil Aviation Agency (ANAC). In an extremely competitive market with low margins and capital-intensive operations, which demands cost optimization and optimized cash flow management from its participants, Galeazzi & Associados was approached by one of the largest national airlines to restructure its debt with financial institutions and suppliers.

The challenge? After the social distancing measures were implemented in Brazil in March 2020 due to COVID-19, the company started facing difficulties. The first problem was a revenue drop of over 80% in the first 6 months of the pandemic, with no clear forecast for sector recovery. The second problem was the concentration of short-term debt, heavily linked to foreign currency. Therefore, how to renegotiate with industry-specific suppliers without jeopardizing market recovery, as well as renegotiate with financial institutions during a crisis?

Focused on implementing the best debt reprofiling strategy for clients, Galeazzi & Associados utilized a cash committee to prioritize short-term payments and customized renegotiations with strategic suppliers. They also developed financial modeling focused on cash flow, considering different scenarios for the duration of the pandemic's impact on the sector. The objective was to renegotiate the debt in a way that would be suitable for the new short-term cash generation reality, while also allowing creditors to receive their credits earlier if sector recovery accelerated.

As a result, Galeazzi led the renegotiation of over R$ 300 million with suppliers through the implementation of debt installment agreements for overdue and future payments, as well as extending the purchase terms for future transactions.

Additionally, approximately R$ 7 billion were restructured with over 20 financial institutions by extending the maturity of all credit lines, aligning due dates with the current cash flow and the expectation of future revenues, utilizing a payment acceleration structure in situations of improved operational performance known as Cash Sweep.

Want to learn more about debt restructuring strategy and finding the most suitable cash flow adjustment to ensure the sustainability of your business? Contact us!