Gol looks to raise $1.5 billion in new equity to repay financing

Brazilian airline Gol Linhas Aereas Inteligentes SA plans to raise $1.5 billion in fresh equity to repay its existing debtor-in-possession financing and shore up its balance sheet, according to its new five-year financial plan.

The company, which entered Chapter 11 bankruptcy earlier this year, also plans to refinance $2 billion in secured debt, Gol said in a filing released on Monday. The plan is still subject to approval by Gol’s creditors and the U.S. Bankruptcy Court. 

Existing unsecured debt faces “a substantial reduction from par value,” the filing stated, while common and preferred shares are also likely to have “minimal value” at the end of the process.

Gol shares fell as much as 6.4% to BRL1.32 on Monday morning in Sao Paulo.

The company also intends to conduct a competitive process to evaluate exit financing proposals, and that any alternative sources of debt and equity capital would need to be approved by the U.S. Court. That process is expected to begin in early June and could last into the fourth quarter of 2024, the filing stated.

Gol forecast that its Ebitda margins will shrink in 2024, and then recover as the company rebuilds its fleet capacity. The Brazilian airline is projecting net leverage ratios of approximately 3.6x, 2.9x and 1.7x in 2025, 2026 and 2029, respectively. 

Gol is said to be in talks for a merger with Azul SA. In one scenario under consideration, Gol’s holding company Abra Group Ltd. would contribute its shares in the airline to Azul in exchange for a stake in the combined entity. 

Last week, both companies announced an agreement to connect their flight networks, which is said to be the first step toward the companies consolidating.