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Gol advices its bondholders as airlines struggles

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Gol Linhas Aereas SA is offering to exchange $780 million of dollar-denominated notes for new securities maturing over a decade, as the Brazilian airline struggles to reshape its finances amid a deepening recession in the domestic market.
Bondholders of five different tranches of debt, one of them maturing as early as next year, are being asked to accept new securities due in 2018, 2022 and 2028, the company said in a regulatory filing. The new notes will be senior to all of Gol’s existing and future unsecured debt.
The haircut for bondholders, who have until June 1 to accept the offer, will range from 30 percent to 70 percent, Chief Financial Officer Edmar Lopes said on a call with
In offering the exchange, Gol cited Brazil’s political instability and contracting economy, along with a “sharp devaluation” in the country’s currency against the USdollar last year that led to a decline in travel. Airlines have been particularly hurt by weak demand among business passengers, who typically generate the most-profitable fares.
“We are offering a coupon that makes sense for current bondholders,” Lopes said. “We understand this is 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.”
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.
The company’s 8.875 percent $325 million in bonds due 2022, its most liquid dollar-denominated securities, have dropped 41 percent this year and trade at 25 cents on the dollar, data compiled by Bloomberg show. Yields on the notes jumped 18.8 percentage points, to 48.48 percent.
Gol, which posted a net loss of 1.18 billion reais in Q4, forecast that its flights would decline 15 to 18pc this year.

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