BNDES social development bank to bail out Brazilian airlines

Gustavo Montezano, head of Brazil’s National Development Bank, announced today the bank has reached a deal to bail out Brazilian airlines through a package that may reach up to BRL 6 billion, according to reports. Mr. Montezano stated during the bank’s Q1 earnings conference that Gol, Latam, and Azul accepted the plan’s conditions, which include the obligation to direct their resources towards their Brazilian operations — not to financial creditors — and to have equal conditions for all companies.

According to Reuters, the plan initially would provide airlines a BRL 10-billion credit line, but private banks were wary of the risk. Now, BNDES is said to be providing 60 percent of the resources, around BRL 2.4 billion, while private banks will contribute BRL 500 million and the remaining credit shall be fundraised by capital markets, through bonds issuing.

Negotiations with carmakers, on the other hand, remain stalled. One of the main reasons for the stalemate is the companies’ wish to use fiscal credits of up to BRL 25 billion as warranties, which BNDES sees as too risky. 

Earnings and Covid-19

BNDES recorded a BRL 5.5-billion profit in the first quarter of 2020, thanks to its divestments – most notably, the BRL 8.1 billion profit it obtained through sales of the state-owned oil company Petrobras’ shares. However, as the pandemic continues to rage, the bank had to provision BRL 1.7 billion for risky credit operations; so far, it has approved credit operations amounting for BRL 13 billion, while 19,000 customers asked for temporary suspension of their payments, amounting to BRL 8.7 billion.

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