S&P Downgrades GOL Linhas Aereas Inteligentes SA (GOL) to 'B-'; Outlook Stable

Standard & Poor's Ratings Services said it downgraded Gol Linhas Aereas Inteligentes S.A. (NYSE: GOL)(GOL) to 'B-' from 'B' on global scale and to 'brB' from 'brBB' on national scale. We affirmed our 'BB' issue-level rating on GOL's debt guaranteed by Delta Air Lines (BB+/Stable/--). The outlook on the corporate ratings is stable.

We have also revised the recovery ratings' band on GOL's senior unsecured debts to '4L' from '4H' as a result of the increasing debt collateralized by shares of GOL's frequent flier subsidiary, Smiles S.A. (not rated).

The stable outlook reflects our expectation that GOL's recently improved liquidity and cost-cutting efforts should cushion it against weak market conditions in Brazil, while the company gradually improves cash flow generation in the next few quarters.

A downgrade is possible if further deterioration in market conditions result in the need to further reduce ticket prices, which coupled with lower load factors and weaker Brazilian real, can increase pressure on cash flow pressures and weaken GOL's liquidity. Also, if we believe the company's capital structure and interest burden are unsustainable for the next few years, we could lower the ratings.

We could upgrade GOL if the improved market conditions and more efficient operations bolster margins and cash generation, resulting in adjusted debt to EBITDA consistently below 5x and FFO to debt above 12%, while the company maintains at least an "adequate" liquidity position.

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