Gol Offering Preferred Shares

Yesterday, GOL Linhas Aereas Inteligentes S.A. (GOL - Analyst Report) filed a registration statement with the Securities and Exchange Commission for a proposed global offering of preferred shares, including preferred shares in the form of ADSs. The company expects to raise somewhere between R$550 million and R$650 million, depending on market conditions.

The company intends to use the proceeds for general corporate purposes and to strengthen its balance sheet, particularly its cash and cash equivalents position.

The offering of preferred shares in Brazil will be registered with the Comissao de Valores Mobiliarios, the Brazilian securities commission. The international offering will be led by BofA Merrill Lynch, Banco Itau BBA, Morgan Stanley and Bradesco BBI, as joint bookrunners.

Shares of Gol Linhas Aereas tumbled 7.7% after the announcement. However, we believe the company will experience growth in the short-to-medium term based on its continued investment in fleet renovation and international agreements.

The company is in the final phase of its plan to replace its 737-300 and 767-300 aircraft with 737-800NGs and 737-700NGs for operations on short- and medium-haul routes. By the end of 2009, its entire fleet will be renewed; the total operating fleet is expected to be 108. The fleet modernization plan guarantees that Gol's fleet will maintain its status as one of the youngest and most modern in the world.

At the end of 2012, 65% of the fleet will comprised of 737-800 SFP aircraft, maintaining the low average age of 6.9 years. Moreover, lower oil prices and falling interest rates in Brazil will help the company in the following quarters. Thus, we are positive on the stock.

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