S&P downgrades Gol Linhas

S&P said it lowered the global scale ratings on Gol Linhas Aereas Inteligentes SA to CC from CCC-, along with its Brazilian national scale ratings to brCC from brCCC-.

The agency also said it lowered the ratings assigned to the company’s senior unsecured debt to CC from CCC- and placed all of the ratings on CreditWatch with negative implications.

The rating on the term loan guaranteed by Delta Air Lines is unchanged at BB.

The recovery rating on Gol Linhas's senior unsecured debt remains at 4, reflecting 30% to 50% expected default recovery.

On May 3, the company announced an exchange offer for all of its outstanding bonds at about 40% of face value on average, part of which is going to be paid in cash, S&P explained.

The downgrades reflect a view that the exchange offer is distressed, given the company's current weak liquidity because of consistent covenant breaches in some of its debts and the company's capital structure, which is considered unsustainable, S&P said.

Under the proposed exchange terms, the company will pay materially less than the originally promised face value of the notes, the agency said, so the exchange is tantamount to default, the agency said.

The corporate credit ratings will likely be downgraded to SD (selective default) and the rating on the unsecured bonds will likely be downgraded to D, S&P said.

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