Gol Granted Permission to Borrow $350 Million
SAO PAULO (Reuters) – In a crucial move to sustain its normal operations, Brazilian airline Gol has been given the go-ahead by a U.S. bankruptcy judge to borrow $350 million of its proposed bankruptcy financing. The approval was granted by U.S. Bankruptcy Judge Martin Glenn during a court hearing in Manhattan on Monday. However, while Judge Glenn expressed concerns regarding the hefty cost of the overall $950 million loan, Gol’s attorney emphasized the urgent need for this initial funding.
High Costs and Urgent Needs
Gol’s attorney, Andrew Leblanc, stressed the company’s desperation for the loan, stating that it is essential to maintain their operations and preserve relationships with the lessors who possess Gol’s fleet of 141 Boeing (NYSE:BA) aircraft. Failure to make payments could lead to interruptions in maintenance work or even the repossession of airplanes by the lessors. Court documents reveal that the loan carries an interest rate exceeding 15%, with an additional $235 million in fees and the possibility of incurring more attorneys’ fees in the future. Leblanc further shared that Gol intends to leverage the legal protections provided by Chapter 11 bankruptcy proceedings to safeguard its leases from external interference. He also disclosed that a competitor airline has already taken steps to approach Gol’s lessors, attempting to attract them by “poaching” Gol’s aircraft.
Bankruptcy Filing and Debt
Gol filed for Chapter 11 bankruptcy protection last Thursday, burdened with a total balance sheet debt of around $8 billion. Within the next 12 months, the company faces $2.7 billion in liabilities, including $647 million for future air travel that has already been purchased, $359 million owed to aircraft lessors, and $292 million owed to lenders. The airline joins a growing list of Latin American carriers seeking bankruptcy protection in the United States due to the ongoing impacts of the COVID-19 pandemic and challenges in its relationship with Boeing. Gol had plans to expand its fleet with new aircraft in 2023, but faced delays caused by the 2019 grounding of Boeing’s 737 MAX jets. Nevertheless, Gol experienced a surge in demand post-pandemic, with its revenue increasing by 16% to $4.66 billion in 2023, according to court documents. Recent examples of other airlines successfully navigating bankruptcy restructurings in the U.S. include LATAM Airlines (OTC:LTMAY), Grupo Aeromexico SAB, and Avianca Group International Limited.