GOL & Abra Group Reach Agreement To Clear $2.55 Billion In Debt For Chapter 11 Exit

GOL Linhas Aéreas Inteligentes (GOL) has announced that it reached an agreement with Abra Group, its parent company, which will convert up to $2.5 billion of debt and obligations into equity as it aims to exit Chapter 11 bankruptcy.

Reorganization plan

On November 6, GOL, the Brazil-based low-cost carrier that entered into a Chapter 11 bankruptcy protection process in January, said it agreed on a plan support agreement (PSA) with Abra Group, the majority shareholder of GOL and Columbia’s avianca.

“Pursuant to the PSA, GOL will file a Chapter 11 plan of reorganization that will allow it to effectuate a significant deleveraging by converting into equity, or otherwise extinguishing, up to US $1.7 billion of its prepetition funded debt and up to US$ 850 million of other obligations.”

The airline added that the group also asserted $2.8 billion in funded debt claims and has agreed to receive around $950 million or possibly more in new equity. This will be based on resolving specific issues and $850 million of take-back debt.

Out of the $850 million, $250 million was mandatorily convertible into new equity on or after 30 months after GOL exits its Chapter 11 proceedings. However, the Brazilian carrier will have to meet certain valuation metrics.

In addition to Abra Group, GOL’s general unsecured creditors will receive new equity valued up to around $235 million and possibly more.

“With the PSA, GOL and its stakeholders benefit from removal of cost and uncertainty of any litigation regarding these asserted claims and move to the next phase of the Chapter 11 cases.”

Raising new equity

Since it filed for Chapter 11 in January, GOL obtained a debtor-in-possession (DIP) loan of $1 billion, with a further $375 million in financing from lessors, allowing GOL to reinvest in its fleet.

As a result, the Brazilian airline has restored “a substantial portion of its” Boeing 737 fleet into active service and it expects to complete the program as it emerges from bankruptcy protection.

To repay the DIP loan, the carrier anticipates raising $1.8 billion of new capital in the form of an exit facility and providing liquidity to support its strategic plans beyond Chapter 11.

“Although such capital will be raised principally in the form of long-term, senior secured debt, under the terms of the PSA, GOL may raise up to US$ 330 million in the form of additional new equity.”

GOL said that it expected to file its reorganization plan with the United States Bankruptcy Court before the end of the year and emerge from bankruptcy in late April 2025.

Reducing capacity

Data from the aviation analytics company Cirium showed that in 2023, GOL averaged 4,329 weekly flights and 768,938 weekly seats.

In 2024, the airline, including scheduled itineraries in November and December, averaged 4,051 weekly departures and 727,470 seats per week.

Meanwhile, ch-aviation fleet records indicated that GOL reduced its fleet size by five aircraft following the exit of three Boeing 737-700 and seven 737-800 aircraft in 2024, which was offset by five 737 MAX 8 deliveries during the year.

Boeing’s last delivery to GOL was on July 5, when the aircraft manufacturer handed over a 737 MAX 8, registered as PS-GRF, to the Brazilian airline.

In May, GOL presented its five-year plan. The company outlined that by 2026, it wants to restore its domestic capacity levels to last seen before the pandemic and grow its fleet to 169 aircraft by 2029.

“The 5-Year Plan is based on achieving robust liquidity and a strong balance sheet.”

The airline entered Chapter 11 bankruptcy proceedings in January. Celso Ferrer, the chief executive officer (CEO) of GOL, said at the time that the process will allow the airline to fully address post-pandemic challenges and enable the carrier to expand its position as a leading airline in the region.

Over the past few years, avianca and LATAM Airlines have completed Chapter 11 restructuring processes in South America in addition to GOL. Azul Linhas Aéreas Brasileiras (Azul) was also rumored to have been exploring that option, but it was able to raise fresh capital and has, so far, avoided going to the courts to restructure its debts.