Brazil’s rescue plan for airlines shrinks further to $680 million: sources

By Carolina Mandl and Rodrigo Viga Gaier

SAO PAULO/RIO DE JANEIRO (Reuters) – Brazilian state development bank BNDES on Wednesday proposed a rescue package worth 4 billion reais ($680 million) for the nation’s airlines, less than half the amount initially anticipated, sources with knowledge of the matter said.

The plan, which first centered around a 10 billion reais credit line, has shrunk in value over time as private lenders balked at extending bigger loans and because the airlines were reluctant to accept larger share dilution, they added.

Under the current scheme, Gol Linhas Aereas Inteligentes SA and Azul SA are due to receive 2 billion reais each. It is unclear if a deal will be reached with LATAM Airlines Group , although it has also been offered up to 2 billion reais.

The airlines have been forced to ground most of their fleet due to the coronavirus pandemic.

BNDES will provide up to 60% of the amount, while private banks will contribute around 10%, with the remainder expected to come from capital markets investors, the sources said, adding that the plan could still change.

The plan provides 5-year bonds which will have a one-year grace period for the repayment of interest as well as instruments which can be converted in equity.

BNDES, banks and investors in the rescue plan will gain a total return of up to Brazil’s interbank benchmark rate plus 14% per year, the sources said, declining to be identified as the discussions were private.

Azul said it had received a revised proposal on potential aid is currently reviewing it. Gol, LATAM and BNDES declined to comment.

Bloomberg reported on the rescue plan amount earlier on Wednesday.

(Reporting by Carolina Mandl in Sao Paulo and Rodrigo Viga Gaier in Rio de Janeiro; Additional reporting by Marcelo Rochabrum; Editing by Edwina Gibbs)