Gol airline gets court approval to borrow US$350mil

SAO PAULO: A US bankruptcy judge allowed Brazilian airline Gol to borrow the first US$350mil of its proposed bankruptcy financing, which a company attorney says was “desperately” needed to maintain normal operations.

US Bankruptcy Judge Martin Glenn approved the initial funding at a court hearing in Manhattan, despite voicing some concerns about the high cost of the overall US$950mil loan.

Glenn will consider approving the rest of the loan at a future hearing, and said he needs more insight into the financing costs.

The loan has an interest rate that currently exceeds 15%, over US$235mil in additional fees, and additional attorneys’ fees that could be added to that cost later, according to court documents.

Gol attorney Andrew Leblanc said the initial funding was “desperately needed” to maintain Gol’s operations and preserve relationships with the lessors who own Gol’s fleet of 141 Boeing aircraft, who could stop maintenance work or seek to reclaim planes if they are not paid.

In addition to the financing, Gol intends to use the legal protections of Chapter 11 bankruptcy to insulate its leases from outside interference, Leblanc said.

A competitor airline has already reached out to Gol’s lessors in an attempt to “poach” Gol’s aircraft, according to Leblanc.

Gol filed for Chapter 11 bankruptcy protection last Thursday with about US$8bil in total balance sheet debt.

The company has US$2.7bil in liabilities coming due in the next 12 months, including US$647mil for future air travel purchased by Gol’s customers, US$359mil owed to aircraft lessors and US$292mil owed to its lenders.

Gol is one of the world’s largest low-cost airlines and a leading provider of domestic air travel in Brazil, serving 30 million passengers in 2023.

The company is the latest Latin American air carrier to file for bankruptcy in the United States, blaming the lingering fallout of the Covid-19 pandemic, and supply chain issues involving Boeing, including the 2019 grounding of its 737 MAX jet and delayed delivery of new aircraft that Gol intended to add to its fleet in 2023.

Gol has seen strong demand since the end of the pandemic, and its revenue grew by 16% to 4.66 billion reais in the third quarter of 2023 from a year earlier.

Other airlines that have recently completed bankruptcy restructurings in the United States include LATAM Airlines, Grupo Aeromexico SAB, and Avianca Group International Limited.

Gol is 53% owned by Grupo Abra, which also owns Colombia-based Avianca. Gol’s Sao Paulo-traded shares were down more than 19% on Monday afternoon at 4.76 reais each. — Reuters