Bond Market News

Brazilian low-cost carrier Gol’s was downgraded to Caa2 from B3 by Moody’s due to its “liquidity risk and sizeable upcoming refinancing needs”. Gol’s debt exchange, announced on February 7, is viewed by Moody’s as a distressed exchange given the losses creditors will incur, and that the deal will avoid a potential default given Gol’s weak liquidity and “untenable capital structure”. The rating agency said that financial leverage will still be high despite the transaction deal due to its weak operating performance. Besides, its exposure to foreign currency and fuel price volatility amid its weak credit metrics continue to hurt its rating view. Moody’s added that the downgrade of senior secured notes ratings also comes on the back of the increased proportion of secured debt within its capital structure – this eliminates the privileged position of such creditors. Also, certain senior priority and LTV tests under the secured notes program would be eliminated after the transaction. S&P took a similar rating action last week where Gol was downgraded to CC from CCC+.

Gol’s dollar bonds were trading lower with its 7% 2025s down 2.96 points to 48.97 cents on the dollar.