Brazilian low-cost carrier Gol is still assessing if it can raise further liquidity via government support, delegates at the Airfinance Journal LATAM 2020 virtual conference have heard.
“We have been working on this since 17 March and we continue to work on it. It is not in our budget but we will try to make it viable because our priority is to increase liquidity,” explains Gol chief financial officer Richard Lark.
“The government had prepared the financial sector with liquidity pre-Covid-19. They would have liked to have seen the banks step up and provide more liquidity. We have not received a single dime of additional credit from our financial partners.”
He says state bank BNDES has offered to invest up to 60% of R$2 billion ($386 million) in an equity structure that the bank had approved in its governance.
“But we are on the hook to find the other 40%. It is a tough equation to match because this is a real-denominated instrument.
“It does not have any real guarantees and it is difficult to attract market-type investors with such a structure.”
Lark adds that the Brazilian government has offered some relief in terms of postponing payments and taxes.
“We have a lot of support from the government and regulators in terms of operational issues but financially we have been on our own. We have postponed payments and taxes but no resources have been coming in.”
He admits that the BNDES mechanism will need a guarantee from Gol’s controlling shareholder.
“Without the guarantee from the controlling shareholder, which is significant, we will not be able to raise that type of funding with the support from the BNDES.”
Gol has addressed its liquidity issues by rolling over some short-term maturities.
In late August, the carrier also repaid a $300 million term loan, which was underwritten in August 2015 by former shareholder Delta Air Lines.
Following the transaction, the average maturity of Gol's long-term debt, excluding aircraft leases and perpetual notes, is approximately four years.
“Going forward, we have no significant debt maturities until 2024,” says Lark.
After that, Gol has $425 million of 3.75% convertible notes maturing on 15 July 2024, and $650 million of senior notes priced at 7% maturing on 31 January 2025.
Gol finished August with approximately R$5.7 billion of total liquidity, including deposits and unencumbered assets, with approximately R$2.1 billion of liquidity in cash and receivables after the amortisation of the aforementioned term loan.
Lark attributes the airlines’ success through the first few months of the Covid-19 pandemic to its employees and suppliers.
“Gol is the only airline in South America that got 100% support from its employees through agreements that effectively will match its labour costs to the operational side from now to the end of next year. That was an investment that we made over a decade of building trust with employees. I don’t think we would be in the position we are now had we not got the support from our employees,” he says.
Lark says most of Gol’s suppliers have also been very supportive. “Over the next couple of weeks, we will be 100% finalised with our suppliers and this includes our aircraft.”
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