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Rating Action:

Moody's assigns B2 rating to Gol's senior secured notes due 2026; stable outlook

22 Dec 2020

New York, December 22, 2020 -- Moody's Investors Service, ("Moody's") assigned a B2 rating to the USD200 million senior secured notes due 2026 issued by Gol Finance and unconditionally Guaranteed by Gol Linhas Aereas Inteligentes S.A. (Gol, B3 stable) and Gol Linhas Aereas S.A.. Gol's existing ratings and its B3 Corporate Family Rating ("CFR") remain unchanged. The ratings outlook is stable.

The new senior secured notes are rated B2, one notch above the CFR of Gol, primarily reflecting the collateral that comprises the first priority security interest in Gol's intellectual property including patents, trademarks, brand names, trade dress, know how, copyrights' secrets, domain names, and social media accounts. The collateral will also include Gol's aircraft spare parts located in Brazil, including rotable, repairable and expendable parts.

Moody's understands that the new notes are secured and would rank at least on a pari passu basis with Gol's other secured indebtedness that pro-forma for the issuance will account for around 40% of the company's indebtedness. Existing unsecured notes ratings are unchanged at Caa1.

The notes proceeds will bolster the company's liquidity and help financing its increasing working capital requirements and support the rapid growth in demand, extend its debt maturity profile through the repayment of upcoming debt maturities, and other general corporate purposes.

RATINGS RATIONALE

Gol's B3 CFR reflects Gol's strong operating performance versus our expectation at the beginning of the coronavirus outbreak. The B3 rating also reflects a lower risk of default in the short term, especially after the repayment of the term loan guaranteed by Delta and the successful refinancing of other debt instruments such as working capital facilities and local market debentures that resulted in a more comfortable debt amortization profile. Gol's ability to reduce costs through agreements reached with employees and lessors that resulted in a better than expected reduction in cash burn is also reflected in the B3 rating.

The B3 rating is constrained by the uncertainties the airline industry will face as a result of the coronavirus pandemic that could lead to slower economic recovery or another round of restrictions for travel and tourism reducing the speed of the rebound in the industry. Despite the better than expected recovery observed so far, the capital markets are still demanding stronger collaterals packages and higher returns when offering new funding to airlines in general. The ability to raise liquidity and control cash burn will still be a key aspect in Gol's ratings assessment.

The adverse impacts of the coronavirus pandemic on the global economy, oil prices and asset prices have sustained a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The passenger airline industry is one of the sectors most significantly affected by the shock given its exposure to travel restrictions and sensitivity of consumer demand to sentiment. Moody's regards the coronavirus pandemic as a social risk under its ESG framework, given the substantial implications for public health and safety.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING

Moody's could upgrade Gol if:

• risks and uncertainties are reduced significantly, and passenger demand begins a sustainable recovery towards pre-coronavirus levels.

• Gol to maintain an adequate liquidity profile, with cash consistently above 20% of revenues, and key metrics to improve such as

• debt-to-EBITDA declines below 6x

• (funds from operations + interest)/ interest is sustained above 3x.

Moody's could downgrade Gol if:

• pace of recovery of passenger demand is slower than Moody's expects

• liquidity concerns increase

• the company is unable to strengthen credit metrics through the recovery phase

• there are increased expectations of a default in the company's financial obligations

PRINCIPAL METHODOLOGY

The principal methodology used in this rating was Passenger Airline Industry published in April 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1091811. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

COMPANY PROFILE

Based in Sao Paulo and founded in 2001, Gol is the largest low-cost carrier in Latin America, offering over 700 daily passenger flights to connect Brazil's major cities and various destinations in South America, North America and the Caribbean, along with cargo and charter flight services. Additionally, Gol has a 53% stake in Smiles, a loyalty program company with more than 14 million participants that allows members to accumulate miles and redeem tickets in more than 900 destinations around the world and offer non-ticket reward products and services. In the fiscal year ended December 2019, Gol reported consolidated net revenues of BRL13.9 billion and lease adjusted EBITDA of BRL4.1 billion. Gol LuxCo, Gol Finance, and Gol Equity Finance are wholly-owned subsidiaries of Gol.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Marcos Schmidt
VP - Senior Credit Officer
Corporate Finance Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 0 800 891 2518
Client Service: 1 212 553 1653

Marianna Waltz, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 0 800 891 2518
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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