Brazilian airlines land BNDES support

Brazilian airlines land BNDES support

Loans Debt Coronavirus Brazil

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Three of Brazil largest airlines – Azul, Gol and LATAM Airlines – have signed on to receive emergency funding from a group of lenders led by the national development bank BNDES, CEO Gustavo Montezano said on Friday.

"We managed to set up an operation for airlines with various conditions and the final price will be given by the market," Montezano during an online presentation of the development bank's first quarter results.

Montezano said it could not reveal the amounts of the financing, but he added that BNDES will use market rates to determine the terms and conditions of the loans.

Azul CEO John Rodgerson said on Thursday that BNDES had set aside BRL4 billion ($683 million) to support the three carriers that have lost revenues from travel restrictions and grounded flights during the coronavirus pandemic.

"The good thing about the BNDES deal is that it's equal. What I get is what Gol gets, what LATAM gets and so there is nobody getting preferential treatment one way or the other," Rodgerson said during a conference call to discuss the airline's first quarter results.

"Any money is welcome right now," he said. "But, again, I think we're disappointed that it's not bigger."

Rodgerson said later in the call that Azul has not decided if the BNDES loan gives the airline the "flexibility" it wants to rebuild, adding that the money could come in around 45 days.

BNDES initially tried to arrange around BRL10 billion in financing, but commercial banks did not want to lend so much money and airlines did not want to put up too much equity as collateral, according to press reports.

In other sectors, BNDES launched a BRL5 billion credit line for small and medium-sized enterprises (SMEs) that is already 50% subscribed and it plans to make additional funds available, Montezano said during the presentation.

"There will be no lack of liquidity to support this segment," he said.

He also announced a new credit insurance line, which could be backed by BRL20 million from the National Treasury, to cover some of the risks for lenders in the SME lending program.

The development bank now has money to lend, despite market turbulence during the coronavirus pandemic, thanks in part to selling stakes in several companies since the end of last year, Montezano said.

"Our disinvestment strategy, which we executed from December last year until March this year, has been extremely successful, fundamental and crucial for the bank to enter this phase of greater volatility with greater protection of its capital and less exposed to market risk," he said.

BNDES cut its equity holdings to BRL59.2 billion at the end of March from BRL112 billion at the end of 2019 through share sales by its investments division BNDESPar, including a deal for its common shares in Petrobras in February, CFO Bianca Nasser said during the presentation.

BNDES posted BRL5.5 billion in net income in the first quarter this year, a 50% drop on the same period last year. The development bank's loan portfolio came to BRL442 billion at the end of March this year, it said.