Gol’s shares plummeted on Monday after the Brazilian airline announced a five-year financial restructuring plan that it admitted poses “significant risk.”
The company’s shares fell 3.55% to BR1.36 after it unveiled the plan, which includes the sale of new shares. This followed a spectacular 11.9% rebound on Friday after the announcement of a code-sharing agreement with Brazilian rival Azul.
Gol filed for Chapter 11 in the United States in January and the following month received court approval for $1 billion in debtor-in-possession (DIP) financing.
The company said that it will refinance $2 billion of secured debt obligations on a long-term basis as part of its five-year plan. Gol also plans to issue some $1.5 billion worth of new shares to inject new capital in the company, helping to pay the DIP and boost liquidity, according to a securities filing on Monday.
Nevertheless, the terms and conditions of the share issue “still need to be determined,” J.P. Morgan equity analysts said in a report.
RISKY BUSINESS
The exit financing process will begin in June and may extend until the last quarter of the year, Gol said.
“Because the company’s debt obligations significantly exceed the company’s equity, it is highly likely that our existing common and preferred shares will have minimal value upon emergence, and, consequently, investing in our shares therefore implies significant risk,” Gol added.
The five-year plan targets a return to pre-pandemic level of domestic passenger capacity by 2026.