GOL bankruptcy exit plan includes $1.5bn capital injection to pay off DIP loan

Brazilian airline GOL Linhas Aereas Inteligentes plans to raise $1.5bn in equity to pay off its debtor-in-possession (DIP) financing and refinancing of $2bn of its senior secured debt, it said in its exit financing scenario filing, published on May 27, 2024. The capital injection will see $1.3bn used to pay off its DIP facility that was secured following its voluntary filing for Chapter 11 in the US Bankruptcy Court for the Southern District of New York in January 2024. The airline added: ""Unsecured debt eliminated and prepetition claims will be equitized or receive such other treatment as will be determined later."" It estimates to emerge from Chapter 11 in early second quarter 2025. The exit plan is a part of its broader plan over the next five years to build its fleet, which consists of all-Boeing aircraft, and boost its operating margins. It said its five-year plan ""forecasts a meaningful increase in liquidity and reduced overall debt, as liquidity reaches 20% of last twelve months (LTM) revenue by year-end 2028."" The airline said in its first quarter earnings report: ""[GOL] is continuing its negotiations with aircraft lessors to ensure GOL has the right capacity to continue to serve current destinations and planned route expansion."" It projects its net debt to leverage ratio to be 1.7x by year-end 2029. In addition, it said it will be ""generating healthy free cash flow after exiting chapter 11"", expecting annual free cash flow of 4.7bn reais ($908.5 million) by year-end 2029. GOL CEO Celso Ferrer read in its first quarter earnings report: ""We have made progress in GOL’s US court-supervised restructuring process, including securing $1bn DIP loan commitments (of which $550 million was drawn by the end of the 1Q24); renegotiating agreements with the majority of the aircraft under leases with lessors to ensure GOL has the right capacity to continue to serve our current destinations; and making progress on the financing plan that will underpin our standalone plan of reorganisation."" The airline reported a net loss of $25.3 million in its first quarter 2024, swinging from its net profit of $26.6 million in the same period a year prior. Its net revenues were down 4.2% year-on-year (YoY) to $915 million.