Gol Bondholders Said to Hire Bankers and Oppose Debt Plan

  • Group represents 20 percent of dollar noteholders, people say
  • Investors said to see overseas bonds as being treated unfairly

A group of Gol Linhas Aereas SA’s bondholders views the Brazilian airline’s debt restructuring proposal as unfair and has hired U.S. investment bank Houlihan Lokey Inc. to negotiate with the company, according to two people with direct knowledge of the matter.

The investor group, representing owners of more than 20 percent of Gol’s dollar notes, sees the plan as failing to provide equal treatment for all unsecured bondholders, the people said. They asked not to be named because the discussions are private.

Creditors represented by Houlihan Lokey say the restructuring proposal protects local bondholders Banco do Brasil SA and Banco Bradesco SA, which will face no haircut, while handing out most of the losses to the owners of overseas notes, the people said. The group argues that the airline shouldn’t have used the market price of its bonds as a basis for bondholder haircuts, the people said. They also said the holders of perpetual bonds receive the worst treatment.

Gol fell 16 percent to 2.72 reais at 4:24 p.m. in Sao Paulo after Bloomberg reported the opposition to the restructuring proposal. Shares earlier tumbled as much as 18 percent, the biggest intraday decline in two months.

‘Good Offer’

Gol declined to comment. Chief Financial Officer Edmar Lopes told reporters late Tuesday that the proposal was “a good offer, considering market conditions. This is what is possible within the company’s cash flow, looking at our balance sheet and considering how we aim to deleverage the company for the upcoming years.”

Houlihan Lokey declined to comment.

The Sao Paulo-based airline is offering to exchange $780 million of dollar-denominated notes for new securities maturing over a decade as it struggles to reshape its finances amid a deepening recession in the domestic market. The haircut for international bondholders, who have until June 1 to accept the offer, will range from 30 percent to 70 percent, Lopes said.

The new notes will be secured by all spare parts owned by Gol and will be senior to all of the airline’s existing and future unsecured debt, the carrier said in a statement. All the new bonds offer premiums over the current market value of the existing notes, the company said.

Moody’s Downgrade

Debtholders who accept the offer by the end of the business day on May 17 will be entitled to an early participation premium. While Gol would like an acceptance rate equal to 95 percent of the aggregate amount of each bond series, the operation can happen with lower participation, Lopes said.

Moody’s Investors Service downgraded its corporate family rating on Gol two steps to Caa3 on Thursday. The ratings company also maintained a negative outlook on the airline, citing “uncertainties related to the ongoing exchange offer amid a prolonged scenario of weaker market fundamentals, which will keep the company’s profitability and cash flow generation under pressure at least through 2017.”

Standard & Poor’s lowered its rating one step to CC on Wednesday.

Gol, Brazil’s second-biggest airline by market share, said it is negotiating with Banco do Brasil and Bradesco, the holders of its 1.05 billion reais ($296 million) in local bonds called debentures, to waive certain financial obligations for a year and extend the maturity of 90 percent of the principal payments to 2018 and beyond. The measure would reduce debt payments by 225 million reais until 2018, according to the statement.

D.F. King & Co. has been appointed as the information agent and the exchange agent for the offer. PJT Partners is serving as financial adviser, while Milbank, Tweed, Hadley & McCloy LLP is serving as legal adviser to Gol.

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