(Bloomberg) -- Shares in Azul SA rallied the most since early 2023 following a report that the Brazilian air carrier is nearing a deal with lessors that would entail a debt-for-equity swap.

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The stock rose as much as 21% in Sao Paulo after the report by Reuters, which cited three people it didn’t identify. It later pared gains.

Under the new plan, the lessors would get an equity stake of around 20%. A majority of lessors have already signaled they would approve the plan, according to the report. Dollar notes due 2030 fell under 2.9 cents to trade at 56.6 cents on the dollar, according to Trace data.

Azul declined to comment. Representatives for the lessors couldn’t be reached.

The deal would come as Azul grapples with higher debt levels and expenses inflated by a weaker Brazilian real, including dollar-denominated lease payments and fuel costs tied to the greenback. Investors have dumped the airline’s stock this year, with shares slumping about 67%, according to data compiled by Bloomberg.

The company’s debt level has climbed to more than four times its earnings before interest, taxes, depreciation and amortization, from three times previously, according to its latest published guidance. It blamed the rising debt on a weaker currency and catastrophic floods that paralyzed the state of Rio Grande do Sul’s main airport in Porto Alegre.

Azul is the only one among Brazil’s trio of dominant airlines that didn’t file for bankruptcy protection after the Covid-19 pandemic ravaged the travel industry. Instead, the company was able to push out maturities through a bond swap in June 2023. But it still needs to address lease obligations and high interest payments.

(Adds bond move, Azul response starting in third paragraph.)

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