The company gets 87 percent of its revenue in reais while over 75 percent of its obligations are in foreign currencies. Concern the airline will struggle to pay its dollar debt has sent yields on its bonds due 2022 soaring more than 6 percentage points since they were sold in September to 15.7 percent. Gol’s press office declined to comment in an e-mailed response to questions.
Chilean Peso
The Brazilian real’s 28 percent drop against the dollar over the past year is the worst in emerging markets after the ruble’s 39 percent slide. On average, developing-nation currencies are down 16 percent, the result in large part of investor expectations that the U.S. will start raising interest rates soon. Slowing economic growth in emerging markets and slumping commodity prices have added to the losses.
In Chile, where the peso has dropped 24 percent over the past two years, benchmark bonds sold by car dealer Automotores Gildemeister SA have lost 12 percent this year. The Santiago- based company reported March 30 that its net loss more than doubled to $137 million last year due to the peso depreciation. Fitch Ratings cut the company’s credit ranking to CCC in September, suggesting “default is a real possibility.”
Gildemeister declined to comment on the possibility of a debt restructuring.
‘Idiosyncratic Problem’
Overall, though, the rate of defaults on junk-rated emerging-market bonds fell to 1.6 percent in the 12 months through February from 1.96 percent in 2013 and 2.56 percent in 2012, according to Standard & Poor’s Global Fixed Income Research. None of the seven defaults this year, including those by Chinese real-estate company Kaisa Group Holdings Ltd. and Brazilian construction company OAS SA, have been the result of currency declines.
“I don’t want to be overly sanguine,” Barclays’ Sunderji said by telephone from New York. “There are companies that are going to suffer, but it’s an idiosyncratic problem, not a systematic problem. You really have to go name by name.”