- Exchange to reduce airline’s total debt by $101.2 million
- About $175 million of $780 million of bonds were tendered
Gol Linhas Aereas Inteligentes SA, Brazil’s biggest airline, said just 22 percent of its overseas bondholders agreed to a debt exchange offer that the carrier said was key to keeping it out of bankruptcy.
Of the $780 million in securities outstanding, only $174.7 million were tendered by holders even after the deal was sweetened last month in an effort to lure more participants. The company had said it was aiming for a 95 percent acceptance rate.
“We will continue assessing the market, looking for medium-term alternatives to deal with our debt,” Chief Financial Officer Edmar Lopes said on a conference call with journalists. “The real’s appreciation in the last months and the drop in the Brazil risk perception certainly weighed on the decision of some bondholders.”
The results are a blow to Gol, which is suffering from a slump in air travel amid Brazil’s worst recession in a century. The carrier posted a record 4.46 billion-real ($1.38 billion) loss last year and has said it needs relief from creditors after burning through 484 million reais of cash in the first quarter. The exchange on dollar-denominated bonds will reduce total debt by $101.2 million and use up $13.9 million in cash, the company said.
“The measures taken by the company will have important short and medium term benefits,” BB Investimentos Analyst Mario Bernardes Junior wrote in a report to clients.
Gol shares fell 6.5 percent to 3.18 reais as of 4:12 p.m. in Sao Paulo. The company’s $325 million of bonds due in 2022 closed Friday at 39.3 cents on the dollar.
The airline had been asking bondholders to accept losses of as much as 55 percent, with incentives designed to reduce the hit that would be based on the carrier’s performance or if there was a change of control of the company. The original proposal, made in May, would have imposed losses of as much as 70 percent.
Gol said it discussed the deal with more than 150 debt holders in the two months since the offer was made.
The company is seeking to resume discussions with banks, lessors and shareholders such as Delta Air Lines Inc. to shore up its finances. Gol is renegotiating 1.05 billion reais in local bonds with Banco do Brasil SA and Banco Bradesco SA. These discussions also include a possible new loan, Lopes said. They’ve already got a waiver on a debt covenant that was set to be violated last Thursday, Lopes said, without elaborating further.
Gol is also discussing returning 20 airplanes that it leases in an attempt to downsize its fleet. Air travel has dropped for 10 consecutive months through May, according to the latest data available by the country’s civil aviation agency.
The company hasn’t changed its plan to cut capacity this year, Lopes said. “We continue having an extremely challenging scenario ahead of us in 2016 and 2017,” he said.
Delta, which holds a 9.5 percent stake in Gol, agreed to reduce the collateral the Brazilian carrier must hold under the U.S. airline’s guarantee of a $300 million term loan from last year, depending on the result of the exchange offer.
“This result will probably have an impact on the other negotiations, but we expect it to be manageable,” Lopes said. “If we have offered something else, the acceptance probably would be higher but this is what fits in our pockets right now.”