NEW YORK--(BUSINESS WIRE)--Fitch Ratings views GOL Linhas Aereas Inteligentes S.A.'s (GOL) recent announcement that the company has executed a memorandum of understanding, through its fully owned subsidiary VRG Linhas Aereas S.A. (VRG), to acquire 100% of the outstanding shares of Brazilian Webjet Linhas Aereas S.A. (WebJet) as neutral to GOL's credit quality. The transaction is subject to the approval from the Brazilian regulatory authorities ANAC and CADE.
Fitch currently rates GOL as follows:
--Foreign currency and local currency Issuer Default Ratings (IDRs) 'BB-';
--USD200 million perpetual bonds 'BB-';
--USD200 million of senior notes due 2017 'BB-';
--USD300 million of senior notes due 2020 'BB-';
--National scale rating 'A-(bra)'.
The Rating Outlook is Stable.
From a credit perspective, the transaction is not expected to materially change GOL's financial leverage and liquidity position over the near term. The acquisition price is BRL96 million, to be adjusted after due diligence is complete during the next 30 to 60 days. The level of new debt that this transaction would bring under GOL's adjusted debt is expected to be around BRL472.2 million.
Strategically, the proposed transaction reflects GOL's consistent business strategy to consolidate and diversify its operations in the Brazilian domestic market. With the proposed transaction, GOL will increase its slots in Brazil's airports as follows: Guarulhos (Sao Paulo), Santos Dumont (Rio de Janeiro), Galeo (Rio de Janeiro), and Confins (Belo Horizonte) from 77, 49, 71, and 52 slots to 97, 65, 79, and 69, respectively. During the first five months of 2011 (January - May) GOL and WebJet reached market shares, measured by revenue per kilometers (RPKs), of 37.53% and 5.40% respectively. The transaction is expected to generate BRL100 million in synergies over a period of two years.
GOL's cash generation, as measured by EBITDAR was BRL1.427 billion during the last 12 months (LTM) period ended March 2011, respectively. GOL's EBITDAR margin has consistently been over 20% during the last two years. The company had approximately BRL7.3 billion in total adjusted debt at the end of March 2011. This debt consists primarily of BRL3.6 billion of on-balance-sheet debt, most of which is secured, and an estimated BRL3.7 billion of off-balance-sheet debt associated with lease obligations. The company's leverage, as measured by net debt/EBITDAR, was 3.9 times (x) at the end of March 2011.
Based on WebJet's public financial figures for fiscal 2010, Webjet's cash generation, as measured by EBITDAR and EBITDAR margin were BRL96.3 million and 12.6% during fiscal 2010. WebJet had approximately BRL472.2 million in total adjusted debt at the end of December 2010. This debt consists primarily of BRL199.5 million of on-balance-sheet debt and an estimated BRL272.7 million of off-balance-sheet debt associated with lease obligations (fiscal 2010 annual rentals estimated at BRL38.9 million). The company's net leverage, as measured by adjusted net debt/EBITDAR and, was 4.3x at the end of December 2010.
On a pro forma basis considering most recent financials available for GOL (March 2011) and WebJet (December 2010), the combined company's annual EBITDAR would be around BRL1.523 billion, with an estimated EBITDAR margin around 20%, net leverage would be around 3.9x, and liquidity, measured by cash and marketable securities/revenue ratio, would be approximately 22%.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology', dated Aug. 13, 2010.
Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646
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