Azul and Gol get extra capital, relieve picture, and shares soar up to 58%

The shares of airlines led the gains of the Ibovespa on Monday 6, with investors reacting positively to news of extra capital obtained by Azul and Gol, among the most leveraged companies on the Brazilian stock exchange.

Azul’s shares were up 44%, and Gol’s, close to 26%, around 3:00 pm. CVC, the country’s largest tour operator, was up 17%. At the intraday peak, Azul’s shares advanced 58%.

In the last 12 months, however, Azul and Gol still accumulate a drop in shares of around 50% and 60%, respectively, as a reflection of the financial difficulties of the airline sector.

On Friday night (3), Gol informed the market that it obtained financing of up to US$1.4 billion through the issue of senior secured notes from its controlling holding company, Abra Group. It was a private placement with Abra investors.

The bonds mature in March 2028 and bear interest at 18%.

Smiles’s intellectual property and brand (Gol’s loyalty program) and a shared pledge over Gol’s intellectual property, brand, and spare parts were offered as collateral.

“The transaction between Abra and Gol represents one of the largest liability management and refinancing transactions ever completed, both in the airline industry and emerging markets.”

“This transaction also represents the tenth debt management or fundraising transaction that Gol has completed since the onset of the covid-19″ pandemic, the company said.

The company’s net debt ratio (including 7 x annual aircraft leases and excluding perpetual bonds) was 9.1 x at the end of the third quarter. Gol reports fourth quarter 2022 results on Wednesday (9) before markets open.

Azul, in turn, announced to the market this Monday morning (6) and its fourth-quarter results that it reached agreements with aircraft lessors that represent more than 90% of the liabilities with these parties.

“These agreements represent a significant part of a comprehensive plan aimed at strengthening Azul’s cash generation, and improving the capital structure […] through a combination of long-term debt and equity priced on a restructured balance sheet,” the company said.

“The lessors represent 80% of our nominal gross debt […] No aircraft have left our fleet during these negotiations, and, in fact, our partners have delivered 12 additional new aircraft to us over the past five months.”

“Negotiations continue with lessors and other partners, such as OEMs [equipment suppliers], and we are very optimistic that we will reach agreements with all of them,” said Alex Malfitani, Azul’s CFO, also in a statement.

Azul’s leverage, measured by the ratio of net debt to Ebitda, ended the year at 5.7 x, the same level as in the third quarter, below the 11.2 x a year earlier.

With information from Bloomberg