Gol Gains as General Atlantic to Invest in IPO: Sao Paulo Mover

Gol Linhas Aereas Inteligentes SA, Brazil’s second-biggest air carrier by market share, rallied after announcing that General Atlantic LLC will invest in about a third of its mileage unit’s initial public offering.

Shares climbed 3.5 percent to 11.54 reais at the close of trading in Sao Paulo, the biggest advance since March 12. Trading volume on the shares was 2.5 times the three month daily average, according to data compiled by Bloomberg. The benchmark Bovespa index rose 0.1 percent.

Gol said in a regulatory filing today that General Atlantic agreed to invest as much as 400 million reais ($202 million) in the IPO of Smiles SA, the airline’s frequent-flier subsidiary.

Smiles plans to sell as many as 52.2 million shares priced in a range of 20.70 reais to 25.80 reais for a total of as much as 1.35 billion reais, according to a prospectus published in Valor Economico today. Moody’s Investors Service had estimated that the IPO might raise 800 million reais to 1.2 billion reais.

“This money will reinforce Gol’s cash in a very hard time for airlines, when costs are rising and demand is not increasing as much as anticipated,” Sandro Fernandes, a trader at brokerage Corval, said by phone from Belo Horizonte, Brazil. “The endorsement from a big private equity firm gives a positive sign to investors, who have been avoiding the Bovespa lately.”

Gol and General Atlantic’s press offices didn’t respond to e-mails from Bloomberg News requesting comment.

The Sao Paulo-based airline posted losses for a second straight year in 2012 after promising profits. Adjusted net loss widened to 1.5 billion reais last year from 669.5 million reais in 2011, according to data compiled by Bloomberg.

Credit Rating

While Gol’s newly appointed Chief Executive Officer Paulo Sergio Kakinoff said the airline will make money this year, Fitch Ratings cut its credit rating two levels last week to B-, or six levels below investment grade.

Gol had the worst operating margin in the fourth quarter globally among airlines tracked by Bloomberg. The company is cutting domestic capacity by 7 percent in 2013 as it tries to boost margins after economic growth came in lower than forecast last year. The airline had projected Brazil’s gross domestic product would grow 3 percent to 4 percent, more than three times the 0.9 percent advance.

The shares lost 11 percent this year while the Bovespa retreated 9.6 percent.

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