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Fitch: GOL's Strategic Alliance with Delta Neutral to Credit Quality; Fin'l Results Under Pressure

Dépèche transmise le 9 décembre 2011 par Business Wire

NEW YORK--(BUSINESS WIRE)--Fitch Ratings views GOL Linhas Aereas Inteligentes S.A.'s (GOL) recent announcement that it has signed a binding agreement with Delta Air Lines, Inc. (rated 'B-'; Positive Outlook, by Fitch) to form a strategic alliance as neutral to GOL's credit quality.

Strategically, the proposed transaction is viewed as a positive as it should improve GOL's connectivity and access to the Brazilian - U.S. corridor with Delta; GOL has a 37.8% market share in the Brazilian domestic market, measured by revenue per kilometer (RPKs) during the January/October 2011 period. This commercial agreement is oriented toward generating benefits for both companies in both the commercial and operational areas. For example, the agreement considers the transfer of the lease of two remaining Boeing 767 aircraft in GOL's fleet to Delta's.

As part of the agreement, Delta will make a strategic minority investment into GOL preferred shares representing USD100 million. GOL is planning to execute a capital increase of preferred shares for a total amount of up to BRL280 million (approximately USD156 million), which includes the proposed transaction and the subscription rights for all of GOL's shareholders. The capital increase is expected to be approved on December 21 by GOL's Board of Directors and the transaction to be completed by the second half of January 2012.

Although the transaction will boost GOL's cash position, from a credit perspective, it is not expected to materially change GOL's financial leverage and liquidity position over the near term, given the size of the transaction relative to GOL's total adjusted debt and liquidity position of BRL8.1 billion (USD4.4 billion) and BRL1.5 (USD789 million), respectively, at the end of September 2011.

The company's leverage and other financial metrics have deteriorated during the last six months ended September 2011 due to lower cash flow generation, measured by EBITDAR, resulting from growing fuel cost, which represents approximately 40% of its operating costs. Revenue declines were driven primarily by increasing competition, resulting in a negative trend in domestic yields. In addition, the negative trend in the Brazilian real relative to the U.S. dollar further exacerbated the deterioration of GOL's leverage as approximately 90% of the company's revenues are denominated in local currency, while approximately 60% of the company's total costs and 80% of the company's total debt are denominated in U.S. dollars.

GOL's cash generation as measured by EBITDAR was BRL942 million during the last-12-month (LTM) period ended September 2011, a declined of 39% versus the LTM period ended in March 2011.

The company had approximately BRL8.1 billion in total adjusted debt at the end of September 2011 versus BRL7.3 billion at the end of March 2011. The company's net leverage, as measured by total adjusted net debt/EBITDAR ratio, was 7.1 times (x) at the end of September 2011 versus 3.6x at the end of March 2011.

Increasing financial leverage is partially mitigated by adequate liquidity and Fitch sees GOL's refinancing risk as low at this time. The company ended the third quarter of 2011 (3Q'11) with an adequate cash position of BRL1.5 billion, representing approximately 20% of the company's LTM revenues. In addition, GOL maintains a manageable debt maturity schedule - incorporating on a pro forma basis debt related to recently acquired Webjet Linhas Aereas S.A. (WebJet) - with due debt payments of BRL112 million and BRL260 million during 4Q'11 and 2012, respectively.

Considering the current trends in oil prices, the Brazilian real relative to the U.S. dollar, and yields and load factors in the Brazilian domestic market, Fitch expects to see further deterioration in the company's net leverage during 4Q'11, reaching levels of around 9.0x by the end of December 2011. Fitch is currently closely monitoring GOL's financial performance. A negative rating action may be likely, absent a significant recovery in the company's operational results during the first and second quarters of 2012.

Fitch currently rates GOL and the company's fully owned subsidiaries as follows:

--Foreign and local currency long-term Issuer Default Ratings (IDRs) 'BB-';

--Long-term national rating 'A-(bra)';

--USD200 million perpetual bonds 'BB-';

--USD200 million of senior notes 2017 at 'BB-';

--USD300 million of senior notes 2020 at 'BB-'.

VRG Linhas Aereas S.A.:

--Foreign currency IDR 'BB-';

--Local currency IDR 'BB-';

--Long-term national rating 'A-(bra)';

--BRL500 million of senior unsecured debentures due in 2017 'A-(bra)'.

GOL Finance, a company incorporated with limited liability in the Cayman Islands:

--Foreign currency IDR 'BB-';

--Local currency IDR 'BB-'.

The Rating Outlook is Stable.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 12, 2011).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229

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