Proceeds from the proposed issuance will be used to refinance existing debt as part of a tender offer recently announced by the company. GOL has commenced an offer to purchase for cash any and all of the international senior notes issued through its fully owned subsidiaries. The obligations to be repurchased include any and all of GOL LuxCo's outstanding 10.750% senior notes due 2023 (
The 'B-' rating for the proposed notes reflects GOL's high leverage and the sensitivity of GOL's financial performance to several factors not controlled by the company such as competition, devaluation of the local currency versus the U.S. dollar, and fuel cost. These variables could offset positive actions taken by management to reduce capacity, measured as available seat kilometers (ASK). GOL's ratings consider its leading market position in the Brazilian domestic market and solid liquidity position. The 'RR4' Recovery Rating of the proposed notes reflects average recovery prospects in the event of a default.
The Stable Outlook for GOL's ratings incorporates the view that the company's consolidated adjusted gross leverage will remain in the 6x to 8x range and its liquidity position, as measured by total cash to LTM revenues, will remain above 20% through the economic cycle.
See the complete list of GOL's ratings at the bottom of this press release.
KEY RATING DRIVERS:
GOL has a leading business position in the Brazilian domestic market with a market share of 36.1%, as measured by revenues per kilometers during the time period from January through
High Gross Adjusted Leverage:
Material business deleveraging executed between 2013 and 2014 has improved margins. These improvements occurred despite a challenging business environment that was marked by a devaluation of the local currency and the slowdown of the Brazilian economy. During 2013 and the first half of 2014, GOL's EBITDAR margins were 17% and 18.2%, respectively. These margins compare favorably with EBITDAR margins of 9% and 3% in 2011 and 2012. Better cash flow generation has resulted in lower adjusted gross leverage. GOL's EBITDAR and total adjusted debt reached levels of
The ratings positively incorporate the company's actions taken during 2013-2014 period to build and maintain significant liquidity. GOL had a cash position of
The ratings incorporate the view that GOL will continue to maintain high liquidity with the cash/LTM revenue above 20% in the short- to medium-term. GOL generated
Negative Rating Action: A negative rating action could be triggered by a deterioration of the company's liquidity resulting from some combination of the following factors: a fuel spike, significant depreciation of the local currency versus the U.S. dollar, excess capacity in the sector affecting the pricing environment and falling demand in the domestic market.
Positive Rating Action: Fitch could consider a positive rating action if GOL consistently reduces volatility in its margins through the economic cycle resulting in lower financial adjusted gross leverage to those levels incorporated in the ratings while keeping a solid liquidity profile.
Fitch currently rates GOL and the company's fully owned subsidiaries as follows:
Gol Linhas Aereas Inteligentes S.A. (GOL):
--Foreign and local currency long-term Issuer Default Ratings (IDRs) 'B-';
--Long-term national rating 'BBB-(bra)';
--Foreign and local currency long-term IDRs 'B-';
--Long-term national rating 'BBB-(bra)';
The Rating Outlook is Stable.
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Methodology - Including Short-Term Ratings and Linkage Between Holding Companies and Subsidiaries' (
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
Source: Fitch Ratings
Hispanic #1 Breaking News for Entrepreneurs, Professionals and Small Business Owners - HispanicBusiness.com
OCTOBER 30, 2014
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