U.S. carrier Delta Air Lines Inc (DAL.N) will expand its alliance with Brazil’s Gol Linhas Aereas Intelligentes SA (GOLL4.SA) GOL.SN under a $446 million stock and loan agreement, Gol said on Friday in a statement.
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Under the accord, Gol’s controlling shareholder, Brazilian investment fund FIP Volluto, will buy up to $90 million and Delta up to $56 million of new Gol preferred stock. Delta will also guarantee third-party loans to Gol of up to $300 million, the statement said.
Gol plans to borrow the money this year, depending on market conditions, Edmar Lopes Neto, the company’s chief financial officer, told investors on a conference call Friday. The loan will have a counter-guarantee of shares in Smiles, Gol’s frequent-flyer plan, Gol said.
“It’s always important to bolster the company’s liquidity,” Lopes Neto said. “It’s not a short-term question because if we look at our debt profile, there is no growing cash need in the short term, and by short-term I mean 12 months.”
It’s always important to bolster the company’s liquidity,
According to the most recent number released by Gol, the Brazilian airline has a cash position of 2.4 billion reais ($1.1 billion).
Since 2012, Gol has sold stakes to Delta and Air France-KLM SA AIRFPA.PA as it raised funds to add foreign routes and invest in a turnaround strategy after years of heavy losses.
Gol preferred shares have fallen more than 20 percent in the last two weeks and are down more than 50 percent this year.
Delta now owns 2.9 percent of Gol’s non-voting preferred shares and Air France-KLM owns 1.5 percent, according to the Gol Web site. Volluto owns 100 percent of Gol common, voting shares and 61.2 percent of its preferred stock.
The terms of the share offering will be announced on July 14, Gol said. Of the up to $146 million new shares to be sold, Volluto will buy 61 percent and Delta the rest.
Gol’s problems have been exacerbated by a decline in the value of Brazil’s currency the real BRL=. A weaker real has driven up the cost of aircraft leases and other foreign debt.
In the first quarter, Gol recorded a loss of 627.7 million reais ($199 million). The result was seven times larger than a year earlier and the company’s 13th-straight negative quarter.
Delta and Gol also agreed to extend the terms of their strategic and commercial operating agreements, the statement said.
Delta to buy $56 million worth of GOL shares
Delta Air Lines will deepen its ties to GOL, agreeing to invest up to $56 million in preferred shares newly issued by the Brazilian airline.
In connection with these transactions, GOL and Delta will extend their commercial cooperation arrangements.
Delta, which spent $100 million in 2011 to gain a stake in GOL and a seat on the carrier’s board of directors, has also agreed to guarantee a $300 million term loan GOL plans to enter into with third party lenders, GOL said, adding, “In connection with these transactions, GOL and Delta will extend their commercial cooperation arrangements.” The two airlines codeshare and, according to GOL, are planning to expand cooperation in aircraft maintenance.
Fundo de Investimento em Participações Volluto, GOL’s controlling shareholder, will invest up to $90 million in the newly issued preferred shares.
São Paulo-based GOL incurred a 2014 net loss of more than $400 million.