Brazil

Bonds of Gol Linhas Aereas Inteligentes SA slumped further into distressed territory as investors question whether the Brazilian airline will be able to strike a deal with creditors, Bloomberg News reported. Dollar notes maturing in 2026 were down nearly 11 cents on the dollar to around 24 cents on Tuesday, according to Trace data, pushing the yield to 88%. It was the biggest decline in the US junk bond market Tuesday. The rout comes after local newspaper Folha de S. Paulo reported on Sunday the company is mulling filing for chapter 11 within a month.

Brazil's government submitted a bill to Congress on Wednesday that would modernize bankruptcy regulations, aiming to speed up proceedings by giving creditors more control over the process, Reuters reported. According to finance ministry official Marcos Pinto, Brazil's current regulations date to the 1980s, and the average bankruptcy process in the country lasts more than 11 years. With the changes, the government expects to cut that length in half while increasing recovery levels and reducing the cost of credit, Pinto added in a press release.

The parent company of Brazil’s Gol Linhas Aereas Inteligentes SA and Colombia’s Avianca is meeting creditors to kickstart negotiations in a bid to fix its balance sheet, Bloomberg News reported. Abra Group Ltd will host talks with representatives of its $1.5 billion bondholders in New York on Wednesday, the first step toward striking a comprehensive restructuring deal for the troubled low-cost airline group. Abra’s bondholders are working with financial adviser Houlihan Lokey Inc. and law firm Dechert LLP, while Abra hired Rothschild & Co., they said.

Brazil’s development bank is considering granting loans to the country’s airlines as part of a government plan aimed at alleviating financial pressures at Gol Linhas Aereas Inteligentes SA, Azul SA and other carriers that have caused sharp increases in fares, Bloomberg News reported. BNDES, as the bank is known, is looking for options to help the airlines come up with sufficient collateral, according to three people with knowledge of the matter.

Brazil posted a wider-than-expected current account deficit in November but the figure as a proportion of gross domestic product (GDP) continued to decrease, data from the central bank showed on Wednesday, Reuters reported. The current account deficit in Latin America's largest economy totaled $1.6 billion in November. Economists polled by Reuters expected a $400 million deficit. Brazil's $6.7 billion trade surplus in the month, larger than the $4.7 billion one reported a year ago, was not enough to offset an increase in the factor payment and service deficits, the central bank said.

Creditors of distressed Brazilian retailer Americanas SA approved a restructuring plan to overhaul 50 billion reais ($10.3 billion) of debt in a key step to applying a recovery plan nearly a year after its sudden implosion due to a multi-year fraud, Bloomberg News reported. With more than 97% of banks, bondholders and suppliers represented at the virtual meeting, the creditors gave the company the green light to proceed with the plan that envisions a capital injection of 24 billion reais in 2024 and recovery rates close to 30%.

Economic activity in Brazil performed worse than expected in October, central bank data showed on Wednesday, corroborating broad readings of economic cooling, Reuters reported. The IBC-Br index, a key predictor of gross domestic product (GDP), fell by a seasonally adjusted 0.06% from September. On a non-seasonally adjusted basis, the IBC-Br was up 1.54% over October 2022 and grew by 2.19% in the 12 months. Latin America's largest economy has previously prospered this year on the strength of its agribusiness and extractive industries.

S&P Global Ratings lifted Brazil’s credit score after the recent approval of an overhaul of the country’s tax code added to a series of economic reforms that have been implemented in the past few years, Bloomberg News reported. S&P raised Brazil’s sovereign rating by one notch to BB, two levels below investment grade, putting it on par with Guatemala and Dominican Republic. The outlook is stable.

A Sao Paulo judge on Tuesday approved bankruptcy protection for SouthRock Capital, which runs all Starbucks coffee shops and TGI Fridays restaurants in Brazil, according to a court filing, Reuters reported. SouthRock had filed for protection from creditors in late October. SouthRock said in a statement that with the approval, it will continue to restructure operations with the aim of protecting employees and customers, while it intends to keep operating stores as normal.

Brazil’s annual inflation rate fell to within the central bank’s target range, keeping policymakers on track to deliver a fourth straight borrowing cost cut at Wednesday’s meeting, Bloomberg News reported. Official data released Tuesday showed consumer prices rose 4.68% in November from a year earlier, just below the 4.7% median estimate of analysts surveyed by Bloomberg. Monthly inflation hit 0.28%. This year, the central bank targets annual inflation at 3.25% with a tolerance range of plus or minus 1.5 percentage points.