Gol’s shares (GOLL4) recorded its most significant drop on the Brazilian Stock Exchange since it filed for judicial recovery in the USA (Chapter 11), last Thursday (25). GOLL4 assets closed down 33.61%, at R$3.93, in this Monday session (29), also marked by several events for the airline.
On Monday afternoon, the shares’ trading halted (and then intensified the fall) after the chief judge of the New York bankruptcy court, Martin Glenn, temporarily accepted Gol’s request to make a Debtor-in loan. -Possession (DIP), a specific credit modality for companies in difficult financial situations, worth US$950 million.
The provisional authorization allows immediate entry of US$350 million into the company as soon as the North American judge provisionally authorizes the transaction. The remainder of the DIP Financing can be passed on to the company after final approval of the financing by the New York Court.
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Earlier, the airline announced that it ended December with debt of R$20.176 billion. Furthermore, it reported that it had negative net equity of R$23.3 billion at the end of the fourth quarter, a 6% decrease compared to the immediately previous quarter.
On Friday night, Gol also informed the decision of the New York Stock Exchange (NYSE) to suspend trading in the airline’s ADS (American Depositary Share). The company said it does not intend to appeal the NYSE’s decision to delist the ADSs and does not anticipate that the delisting of the ADSs will affect the company’s operations or business.
According to Citi, the decision does not seem surprising in light of the Chapter 11 protocol. “While a successful Chapter 11 exit in the US could eventually help Gol improve its balance sheet and costs, this move poses even more risks of decline for current equity”, assesses Citi, which has a sale recommendation for the company’s ADRs.
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Meanwhile, more houses are reviewing shares following the US restructuring order. BB-BI reduced the recommendation for sale and the target price to R$2.40 this Monday, seeing great dilution for shareholders.
For the bank’s analysts, the possibility that part of the debt will be converted into shares is concrete. In a base scenario where the controlling shareholder (ABRA), which has around US$1.2 billion in debt securities, carries out such a conversion, it estimates a dilution factor above 60% for current shareholders, with a target price reducing the R$ 2.40. “Therefore, we believe that the risk/return relationship at this moment is unfavorable for the investor and, to avoid destruction of value, we suggest exiting the paper”, points out BB-BI.
XP Investimentos reported having placed the company’s action under review, as the company begins the legal process. Last week, Itaú BBA also placed the share under review, while Goldman Sachs stopped covering the shares, JPMorgan maintained a sell recommendation and Bradesco BBI cut its recommendation to equivalent to sale and sees the share at R$1.
On Friday, S&P Global Ratings and Fitch Ratings downgraded Gol’s global rating from “CCC-” to “D”.
Fitch recognizes that the company has recorded an improvement in operational metrics since the Covid-19 pandemic, but explains that the increase in lease payments and high interest rates have put pressure on cash flow generation, which makes the company’s unsustainable debt.
S&P also cites that the Brazilian company faces a heavy debt load, despite the improvement in operational metrics in 2023. According to the analysis, the scenario reflects high leasing payments, capital expenditures and delays in deliveries of the Boeing 737 Max, that put pressure on cash flow.