Fitch Ratings has affirmed Gol Linhas Aereas Inteligentes S.A.'s (GOL) ratings as follows:
--Foreign and Local Currency long-term Issuer Default Ratings (IDRs) at 'B+';
--Long-term National Rating at 'BBB(bra)';
--USD200 million perpetual notes at 'B/RR5';
--USD200 million senior notes due 2017 at 'B/RR5'.
Fitch has removed all of GOL's ratings from Rating Watch Negative and subsequently assigned a Negative Rating Outlook.
Fitch's decision to remove the company from Rating Watch Negative is due to the company's successful efforts in improving its liquidity, which has dramatically reduced the very high refinancing risk it faced at the beginning of the year. Steps taken by GOL included a capital increase of BRL203.5 million and the issuance of BRL400 million debenture due in 2011. The company also raised BRL255 million, of which it had received BRL104 million as of June 30, 2009, through the advance sale of miles to Bradesco and Banco do Brasil. GOL continues to pursue a strong capital structure. On Aug. 25, 2009 the company announced its intention to sell BRL500 million of preferred shares through a global offering. This is part of an effort to increase its cash balance to BRL800 million at the end of 2009 from BRL415 as of Dec. 31, 2008.
The Negative Outlook reflects GOL's cash flow levels which continue to be low relative to total lease-adjusted debt. The potential for cash flow to fall quickly if the H1N1 virus becomes more prevalent in Brazil is also considered in the Negative Outlook. In order to revise the Outlook to Stable from Negative, Fitch would like to see a sustained favorable business environment for GOL, allowing the company to generate positive free cash flow, plus additional deleveraging.
During the latest-twelve-months (LTM) ended June 30, 2009, GOL generated BRL1.1 billion of EBITDAR, an improvement from BRL682 million during 2008. The company's cash flow from operations (CFO) during the LTM was negative BRL302 million, while its free cash flow was negative BRL582 million. GOL's debt adjusted for operating leases was BRL8.3 billion at the end of June 2009, while its cash and marketable securities balance was BRL600 million. These figures result in an adjusted net debt-to-EBITDAR ration of 7.1 times (x) for the LTM.
GOL's on-balance sheet debt totals BRL3.2 billion. It primarily consists of BRL1.5 billion of secured debt and financial leases, BRL489 million in PDP loans, BRL750 million in public unsecured debt and BRL394 million in a privately placed debenture. Leases expense for the LTM were BRL728 million, resulting in an off-balance-sheet debt adjustment made by Fitch of BRL5.1 billion.
Fitch estimates that GOL's EBITDAR for 2009 will be approximately BRL 1.3 billion, resulting in a net leverage ratio of 6.75x. The improvements in EBITDAR versus 2008 levels are due to lower fuel prices and the depreciation of the U.S. dollar versus the Brazilian real. GOL's aircraft fuel costs for the first half of 2009 were BRL876 million, a decline from BRL1.4 billion during the similar time period in 2008. The company also reduced its capacity, as measured by Available Seats per Kilometer (ASK), during the first and second quarters by 13.7% and 9.8%, respectively. The reduction in capacity led to higher load factors which positively impacted the company's Cost per Available Seat Kilometer (CASK). Combined the aforementioned factors have more than offset declines in Revenues per Available Seat Kilometer (RASK) as reflected in an increase in the RASK - CASK spread to BRL 1.02 cents during the first semester of 2009 versus a negative spread of BRL1.13 cents during the first half of 2008.
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or
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