Shares in Brazil’s Gol tank on report of potential US bankruptcy filing

SAO PAULO (Reuters) -Shares in Brazilian airline Gol tumbled on Monday after local newspaper Folha de S.Paulo reported that the company was considering filing for Chapter 11 bankruptcy protection in the United States within the next month.

Gol’s shares were down more than 11% in morning trading on the report, making the carrier the biggest loser on Brazil’s benchmark stock index , which was down 0.4%.

Gol, Brazil’s second-largest airline in terms of passengers transported, has been struggling with high debt and last month hired Seabury Capital to assist it in a broad capital structure review.

The carrier, which has also recently grappled with delayed aircraft deliveries by Boeing (NYSE:), did not immediately respond to a request for comment.

Folha, citing sources familiar with the matter, reported that Gol was still trying to negotiate an out-of-court deal but the possibility was seen as increasingly inviable as multiple stakeholders were involved in the talks.

Gol at an investor event last month confirmed that it was in negotiations mainly with lessors to restructure its debt, but that it also expected bondholders and shareholders to chip in.

Sell-side analysts and rating agencies say Gol has strong operating figures amid healthy demand for air travel in Brazil, but high leasing and interest expenses have been pressuring its cash flow and affecting its debt profile.

“We expect a negative market reaction to this news,” Itau BBA analysts led by Gabriel Rezende said of the Folha report, “as it will raise concerns about additional potential dilution for shareholders.”

Peer LATAM Airlines (OTC:) in 2022 came out of pandemic-related bankruptcy proceedings with an $8 billion reorganization plan. Azul also restructured its debt last year but through deals with lessors, manufacturers and bondholders.