Gol Readies Debentures

Gol is preparing to issue BRL400m in secured domestic bonds. The 2011 bonds to be issued through the low-cost carrier’s VRG unit will include a 6-month grace period and are expected to pay 126.5% of DI. Proceeds will strengthen the Brazilian airline’s cash balance and are set to complement the BRL204m raised through a rights offering to controlling shareholders. Gol is rated BBB on a national scale. Banco do Brasil is managing the sale, which still requires regulatory approval. “The fact that Gol was able to access some financing should be a mild positive to this story, especially when short-term maturities of $456m are taken into consideration. However, because the company remains largely cashflow negative, the short-term outlook remains very difficult,” Barclays says in a report. With leverage approaching 11.5x and no protection to unsecured creditors and real refinancing risk, Barclays adds it sees limited upside on the bonds.