Fitch lowers Gol Linhas

Fitch Ratings said it downgraded Gol Linhas Aereas Inteligentes SA’s long-term foreign- and local-currency issuer default ratings to C from CCC, long-term national rating to C(bra) from CCC(bra) and the rating on its $200 million perpetual bonds to C with recovery rating of RR5 from CCC- with recovery rating of RR5.

The agency also said it downgraded VRG Linhas Aereas SA’s long-term foreign- and local-currency issuer default rating to C from CCC and long-term national rating to C(bra) from CCC(bra).

Fitch also lowered the rating on GOL Finance’s $225 million senior unsecured notes due 2017 to CC with recovery rating of RR3 from CCC- with recovery rating of RR5 and the rating on its $300 million senior unsecured notes due 2020 to C with recovery rating of RR4 from CCC- with recovery rating of RR5.

The rating on GOL LuxCo SA’s $200 million senior unsecured notes due 2023 also was downgraded to C with recovery rating of RR4 from CCC- with recovery rating of RR5, along with the rating on its $325 million of senior unsecured notes due 2022 to C with recovery rating of RR4 from CCC- with recovery rating of RR5.

The downgrades follow GOL’s proposed exchange offering announced May 3, Fitch said. The proposed offering imposes a material reduction in terms versus the original terms of unsecured notes, the agency said. The successful completion of the exchange would result in the issuer default ratings being downgraded to RD, or restricted default, Fitch said.

Brazil’s adverse macroeconomic scenario should result in declining levels of passenger activity and lower yields within the airline industry, the agency explained.

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