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Demand for Azul IPO tops supply by five times: sources

(Adds details on last week's suspension, book distribution throughout)

By Guillermo Parra-Bernal

SAO PAULO, April 10 (Reuters) - Investor demand for shares in Brazilian airline Azul SA's initial public offering in São Paulo and New York surpassed the amount of stock on offer by five times, ahead of pricing later on Monday, three people with knowledge of the transaction said.

The IPO could price at 21 reais per preferred Brazilian share and $19.90 per American depositary share, both in the middle of a suggested price range for the transaction, the sources said. Azul declined to comment. Robust demand for the transaction could lead Azul to offer additional and supplementary allotments, they said.

The airline started by JetBlue Airways Corp founder David Neeleman filed to sell up to 72 million preferred shares, with a ratio of three Brazilian shares per ADS.

The situation suggests that an April 6 decision by Brazil's securities watchdog to suspend Azul's IPO hours ahead of pricing on Thursday did little to abate interest in the issue. According to the watchdog known as CVM, Azul had given some investors information that was not included in the transaction's official documentation.

Before the suspension, sources familiar with the deal expected the Azul IPO to be between 60 percent to 70 percent subscribed by investors outside Brazil. Brazilian investors were expected to snap up the remaining amount.

The impasse posed a temporary setback to Azul, which had to call off plans to go public on three previous occasions because of chellenging market conditions. The company got clearing from regulators to pursue the IPO on Friday, after pledging to include estimates of projected gains in Azul's investment in TAP Transportes Aéreos Portugueses SA into the official prospectus.

The investment banking units of Citigroup Inc, Deutsche Bank AG and Itaú Unibanco Holding SA are acting as the offering's underwriters. The stock should begin trading on Tuesday under the symbols "AZUL4" in São Paulo and "AZUL" in New York. (Additional reporting by Aluísio Alves in São Paulo; editing by Meredith Mazzilli)