Gol’s Debt Swap Offer Gets Tepid Response

Only 22% of the Brazilian airline's bondholders accepted the offer but it is continuing to look for medium-term restructuring solutions.
Matthew HellerJuly 6, 2016

Gol Linhas Aéreas Inteligentes, Brazil’s largest airline, is continuing to look for solutions to its financial problems after only 22% of its bondholders accepted a debt swap offer.

Gol was aiming at a 95% acceptance rate but the company announced Monday that creditors only tendered $174.7 million of about $780 million in securities outstanding. Despite the disappointing result, CFO Edmar Lopes Neto said the swap opened the door for talks with banks on renegotiating 1.05 billion reais ($318 million) in local bonds.

“We will continue assessing the market, looking for medium-term alternatives to deal with our debt,” he said on a conference call with reporters. “The real’s appreciation in the last months and the drop in the Brazil risk perception certainly weighed on the decision of some bondholders.”

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Neto reiterated that Gol was not negotiating a cash injection from Delta Air Lines, which holds a 9.5% percent stake in the company.

Amid Brazil’s worst recession in a century, Gol and other Brazilian airlines have been hit by soft consumer demand, excess capacity and lower yields. After losing 7.6 billion reais ($2.16 billion) in four years, it proposed a debt swap implying a haircut of up to 70% on bondholders’ investments.

Gol extended the deadline on the deal after creditors tendered just 17% of their bonds. According to Reuters, the swap reduced Gol’s gross financial debt, which stood at 7.9 billion reais ($2.4 billion) in March, by $101 million and will reduce debt-servicing by $9 million annually.

Lopes said this year’s weakening of the dollar had helped the airline cover foreign-denominated debts with revenue denominated largely in reais but Gol is sticking to its plan to reduce capacity in Brazil.

In May, Moody’s Investors Service downgraded Gol’s credit ratings, describing the debt swap as “as a distressed exchange given that the new package of securities and assets offered amount to a materially lower financial obligation relative to its original promise, with the effect of allowing the issuer to avoid a Moody’s default event.”