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Fitch Rates GOL's Proposed Unsecured Notes 'B/RR5(exp)'

  Fitch Rates GOL's Proposed Unsecured Notes 'B/RR5(exp)'

Business Wire

NEW YORK -- February 5, 2013

Fitch Ratings has assigned an expected rating of 'B/RR5(exp)' to Gol Linhas
Aereas Inteligentes S.A.'s (GOL) proposed unsecured notes. These notes will be
issued through GOL's wholly owned subsidiary, VRG Linhas Aereas S.A. (VRG),
and will be unconditionally guaranteed by GOL. The target amount of the
proposed issuance is up to USD300 million with a tenor of up to 10 years; the
final amount and tenor of the issuance will depend on market conditions.
Proceeds from the proposed issuance will primarily be used to refinance
existing debt and for general corporate purposes. The final rating is
contingent upon the receipt of final documents conforming to information
already received.

Fitch Ratings currently rates Gol Linhas Aereas Inteligentes S.A.'s (GOL) and
its fully owned subsidiaries VRG Linhas Aereas S.A. (VRG) and GOL Finance as
follows:

Gol Linhas Aereas Inteligentes S.A. (GOL):

--Foreign and local currency long-term Issuer Default Ratings (IDRs) 'B+';

--Long-term national rating 'BBB (bra)';

--USD200 million perpetual bonds 'B/RR5';

VRG Linhas Aereas S.A. (VRG):

--Foreign and local currency long-term IDRs 'B+';

--Long-term national rating 'BBB(bra)';

--BRL500 million of senior notes due 2017 'BBB-(bra)';

GOL Finance, a company incorporated with limited liability in the Cayman
Islands:

--Foreign and local currency long-term IDRs 'B+';

--USD200 million of senior notes due 2017 'B/RR5';

--USD300 million of senior notes due 2020 'B/RR5';

The Rating Outlook for GOL, VRG, and GOL Finance is Negative. The ratings of
these companies have been linked through Fitch's parent and subsidiaries
rating criteria.

The ratings reflect GOL's competitive business position in the Brazilian
domestic market with a market share of 38.7%, as measured by RPK, at the end
of 2012. The ratings are constrained by the volatility of company's cash flow
generation, and its high leverage. Additional ratings limitations include the
company's reliance upon its domestic passenger market, which results in
limited product and geographic diversification and exposes the company's cash
flow to the behavior of its competitors in the Brazilian market.

The Negative Outlook incorporates Fitch's concern regarding the company's
ability to reverse its negative FCF trend, which could result in a significant
deterioration of its liquidity during 2013. Also factored into the Negative
Outlook is the high degree of sensitivity of GOL's financial performance to
several factors not controlled by the company such as competition, strength of
the local currency versus the U.S. dollar, and high fuel prices, which could
offset actions taken by management in terms of reducing capacity and ex-fuel
costs.

The 'B/RR5' rating of the company's unsecured public debt reflects below
average recovery prospects in the event of a default due to the subordination
of the unsecured debt to secured debt related to aircraft finance.

SECURITY

The notes will be VRG's senior, unsecured, general obligations and will rank
pari passu in right of payment with all of its existing and future senior,
unsecured, general obligations. GOL, or the guarantor, will unconditionally
guarantee on a senior unsecured basis all of VRG's obligations pursuant to the
notes. The guarantee will rank pari passu in right of payment with the other
unsecured unsubordinated indebtedness and guarantees of GOL. The notes will be
effectively junior to VRG's and GOL's secured debt to the extent of the assets
and properties securing such debts. There are not financial covenants in the
notes or the guarantee.

CREDIT PROFILE

GOL's cash generation, as measured by EBITDAR, was BRL541 million during the
LTM ended Sept. 30, 2012. This compares unfavorably with the company's EBITDAR
of BRL707 million during 2011 and continues a declining trend, as EBITDAR was
BRL1.5 billion in 2010. Key variables for the deterioration were increasing
competition, high fuel prices, and the devaluation of the Brazilian real
versus the U.S. dollar. Weakening macro-economic conditions also contributed
to the company's poor performance.

During the LTM ended Sept. 30, 2012, GOL's free cash flow (FCF) was negative
BRL1.6 billion. Fitch's FCF calculation for the LTM considers negative cash
flow from operations (CFFO) of BRL876 million less capital expenditures
related to aircraft finance of BRL761 million.

The company had approximately BRL9.7 billion of total adjusted debt as of
Sept. 30, 2012. This debt consists primarily of BRL5.3 billion of
on-balance-sheet debt, 40% of which is secured aircraft financing, and an
estimated BRL4.4 billion of off-balance-sheet debt associated with lease
obligations. As of Sept. 30, 2012, the company had BRL1.7 billion of cash and
marketable securities, which is equivalent to about 20% of the company's LTM
revenues.

GOL faces debt amortizations of approximately BRL375 million in 2013 and
BRL132 million in 2014. These figures exclude approximately BRL1.1 billion of
debt associated with the company's 4th and 5th debenture issuance, which will
appear under short-term debt in its Dec. 31, 2012 financial statements, due to
covenant violations. GOL obtained waivers for covenant violations on Feb. 1,
2013 that will results in this debt maturing as originally scheduled between
2015 and 2017 if the company is in compliance with restrictive leverage
covenants as of Dec. 31, 2013.

The company's financial leverage is high for the rating category and is
expected to decline during 2013. GOL's gross and net leverage, as measured by
total adjusted debt/EBITDAR and total adjusted net debt/EBITDAR ratios, were
17.9x and 14.8x, respectively, during the LTM ended Sept. 30, 2012.

GOL's EBITDAR should increase during 2013 due to the company's efforts to
reduce capacity in the domestic market. The company's management is
considering reducing its fleet capacity in the domestic market by 6% to 8%
during the first half of 2013, which should result in better revenues per
available seat kilometers (RASK). Brazil's economy is also expected to expand
by about 3.7% during 2013, which compares with an estimated 1% during 2012.

GOL is in the process of seeking approval for an initial public offering (IPO)
of its fully owned subsidiary, Smiles S.A. The company's board of directors is
expected to approve this initiative in its next session scheduled for this
February 8. The ratings incorporate the expectation that the company will be
able to complete this process and use an important portion of the IPO proceeds
to reduce its total on-balance debt during 2013.

SENSITIVITY/RATINGS DRIVERS:

A rating downgrade could be triggered by any of the following factors: an
inability to reverse its free cash flow trends, the projection of tight
covenant levels for the debentures at the end of 2013, a general weakening of
industry conditions in the Brazilian market, or the persistence of poor
operating performance. Delays in the company's asset sales process related to
the frequent flier unit would also be viewed negatively.

An upgrade is unlikely to occur during 2013. Improved operational performance
that would lower leverage to around 6.0x by the end of 2013 could lead to a
revision of the Outlook to Stable.

Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' Aug. 8, 2012;

--'Parent and Subsidiary Rating Linkage' Aug. 8, 2012;

--'National Rating Update' Jan. 19, 2011;

--'Rating Airline Companies, Sector Credit Factors' Dec. 14, 2012.

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685552

National Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

Rating Airline Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=697062

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Contact:

Fitch Ratings
Primary Analyst
Jose Vertiz, +1-212-908-0641
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
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Director
or
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Managing Director
or
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