VRG Linhas Aereas is to offer up to $300 million in senior unsecured guaranteed notes with a tenor of up to 10 years.
Proceeds from the proposed issuance will primarily be used to refinance existing debt and for general corporate purposes.
The target amount of the proposed issuance is up to $300 million with a tenor of up to 10 years; the final amount and tenor of the issuance will depend on market conditions.
The notes will rank pari passu in right of payment with all of its existing and future senior, unsecured, general obligations. Gol Linhas Aereas Inteligentes (GOL), the parent company of VRG, will unconditionally guarantee the notes.
The notes will be effectively junior to VRG's and GOL's secured debt to the extent of the assets and properties securing such debts.
Standard & Poor's Ratings Services assigned its 'B-' rating to VRG Linhas Aereas's proposed unsecured notes.
Standard & Poor's says the notes is one notch lower than the corporate credit rating on GOL, reflecting the effective subordination of the notes to existing secured debts.
"Under our criteria, operating leases and other aircraft financing are assumed to be senior secured obligations with priority of payment relative to unsecured debt," says the rating agency.
Fitch Ratings assigned an expected rating of 'B/RR5(exp)' to GOL proposed unsecured notes. The rating agency gives a negative outlook to GOL, fully owned subsidiaries VRG Linhas Aereas and GOL Finance. The negative outlook incorporates Fitch's concern regarding the company's ability to reverse its negative free cash flow trend, which could result in a significant deterioration of its liquidity during 2013.
The company had approximately 9.7 billion reais ($4.88 billion) of total adjusted debt as of 30 September 2012. This debt consists primarily of 5.3 billion reais of on-balance-sheet debt, 40% of which is secured aircraft financing, and an estimated 4.4 billion reais of off-balance-sheet debt associated with lease obligations. As of 30 September 2012, the company had 1.7 billion reais of cash and marketable securities, which is equivalent to about 20% of the company's LTM revenues.
Fitch says GOL faces debt amortizations of approximately 375 million reais in 2013 and 132 million reais in 2014.