BNDES steps in for airlines

BNDES steps in for airlines

Debenture Debt Capital Markets Fixed Income Economy & Policy Corporate & Sovereign Strategy Coronavirus Regulation Brazil Latin America

Brazil's national development bank BNDES announced on Sunday a new set of measures to inject capital into companies impacted by the coronavirus pandemic, including buying debentures issued by airlines.

BNDES' equity investments division, BNDESPar, will buy the convertible debentures at a low rate, and the airlines will use the proceeds to finance operations, rather than pay down debt, BNDES CEO Gustavo Montezano said during a video conference.

The airlines will begin to receive the funds in April, and the development bank could extend the program to other sectors after that, Montezano said. BNDES does not know how much it spend to buy debentures from airlines because it is still in negotiations, he added.

Montezano also announced an additional BRL40 billion in payroll financing to help up to 1.4 million companies keep 12.2 million workers on the books. The 2.5-year loans will carry a fixed rate of 3.75% and a grace period of six months, and companies that access the credit line cannot fire employees for two months, according to BNDES.

In addition, BNDES will provide BRL2 billion in credit to buy hospital beds and medical equipment, Montezano said. The five-year loans, which could be disbursed within two weeks, come with a two-year grace period and carry a rate up to 526 basis points over the TLP long-term lending rate, according to BNDES.

The development bank has made available BRL97 billion to support businesses hurt by the coronavirus outbreak, following an announcement last week to provide BRL55 billion in support.

Within two days of announcing the package, BNDES said it received standstill requests from 259 borrowers for BRL3.6 billion in loans, or 15% of the development bank's corporate clients.