Gol Linhas Aereas Inteligentes SA (GOLL4), Brazil’s second-biggest air carrier by market share, fell as Fitch Ratings cut its credit ranking by two levels, citing a “continued deterioration” in the company’s credit profile.
Shares dropped 3.6 percent to 10.86 reais at the close of trading in Sao Paulo, the lowest since Dec. 17. The benchmark Bovespa index declined 1.6 percent. Gol’s dollar bonds due in 2020 fell 6 cents to 88 cents on the dollar, pushing the yield up 136 basis points to 11.75 percent, according to data compiled by Bloomberg.
Fitch lowered Gol’s rating to B-, or six levels below investment grade, with a negative outlook, and said the cut reflects “poor operational results and the expectation of limited recovery in the company’s cash flow generation during 2013,” according to an e-mailed report yesterday.
Gol’s margin on earnings before interest, taxes, depreciation, amortization and rent fell to 3.2 percent in 2012 from 9 percent in 2011 and 22 percent in 2010, according to Fitch. The lower margins reflect increasing competition, rising fuel costs and a weakening Brazilian real, the ratings company said in the statement.
“The downgrade is reason for concern, because it will make it much more expensive for Gol to finance operations,” Marcelo Varejao, an analyst at brokerage Socopa, said by phone from Sao Paulo. “The air carrier now has to harden its restructuring plan in order to improve its financial situation.”
In 2012, Sao Paulo-based Gol cut flights and fired workers to improve profitability. The company’s net income has trailed analysts’ estimates in the past four quarters.
Standard & Poor’s placed the Brazilian airline’s rating on negative watch on March 28, citing “weaker operating performance and negative cash flow in the fourth quarter of 2012.”
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