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Bond Market News
GOL Upgraded by Fitch to B-
September 23, 2021
Brazil’s GOL Linhas Aereas Inteligentes S.A.’s (GOL) Issuer Default Ratings (IDRs) have been upgraded to B- from CCC+ with a stable outlook by Fitch. GOL Finance’s unsecured bonds have also been upgraded to B-/RR4 from CCC+/RR4. The rating action on the leading carrier in Brazil comes as domestic air travel in Brazil is on a road to recovery after an effective vaccination drive in the nation. With the improving conditions, the company’s adjusted EBITDAR is forecasted at ~BRL 300mn ($57mn) in 2021 and ~BRL 3.6bn ($680mn) in 2022. It’s net leverage is expected to be ~4.8x in 2022, reducing to 4.1x in 2023. The carrier is expected to raise ~BRL 1.4bn ($260mn) in 2021 through new equity to fund its negative free cash flows (FCF) of ~BRL 2.7bn ($500mn) for 2021. As the travel demand rebounds, the FCFs are likely to improve to negative ~BRL 500mn ($95mn) in 2022. According to Fitch, “The upgrade reflects the reduction in GOL’s short-term refinancing risks, as a result of the recent conclusion of its liability management strategy, as well as its improved liquidity position. The company’s proven access to local and international capital market has also been a positive credit consideration. Improving industry dynamics in the Brazilian airline domestic market, which is the backbone of GOL’s operations, is expected to drive operating cash flow up and support deleveraging trend in 2022.”
GOL’s short-term maturities totaled BRL 1.7bn ($320mn) while it has a cash of BRL 800mn ($151mn) as of June 30 2021. The rating agency said, “Considering pro-forma figures, after the refinancing and the equity from American Airlines, short-term debt will be around BRL 0.5bn ($95mn) and cash around BRL1.8bn ($340mn).”
Gol Finance’s 7% 2025s yielding 8.16% were down 0.31 to trade at 96.66 while it’s 8.75% perps yielding 54.14% (YTC 05/01/2022) were up 0.27 to trade at 88.85 cents on the dollar.
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