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 slipped as much as 13% on the report before paring some losses to trade down 8.8%. The carrier was the biggest loser on Brazil's benchmark stock index Bovespa, which was trading near flat.
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.
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.
The carrier, which has also recently grappled with delayed aircraft deliveries by Boeing (NYSE:BA), in a statement to Reuters said that efforts to improve its profitability and strengthen its balance sheet were underway.
"Gol is in discussions with its financial stakeholders about several options that would provide it with greater financial flexibility, including additional capital to finance operations," the airline added.
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:LTMAY) in 2022 came out of pandemic-related bankruptcy proceedings with an $8 billion reorganization plan. Fellow airline Azul also restructured its debt last year but through deals with lessors, manufacturers and bondholders.