A deal is expected soon to allow GOL Linhas Aéreas Inteligentes (G3, Sao Paulo Congonhas) to delay payments related to a USD300 million loan for which Delta Air Lines (DL, Atlanta Hartsfield Jackson) is the guarantor, two unnamed sources have told Bloomberg without giving further details. The loan is due to mature in August 2020.

Victor Mizusaki, an analyst at Sao Paulo-based investment firm Banco Bradesco BBI SA, said in an email to clients dated June 5, seen by Bloomberg, that he expects the discussions to “conclude soon” and that this should alleviate GOL’s cash position.

The Brazilian carrier took out the five-year loan in August 2015, paying annual interest of 6.5%. Voting shares issued by Smiles SA, the airline’s mileage scheme, were used as collateral, according to a statement GOL issued at the time.

However, Delta commented in its first-quarter results published on April 22 that there is an increased risk related to GOL’s ability to repay the loan.

“GOL has a USD300 million five-year term loan facility with third parties maturing in August 2020, which we have guaranteed. Based on market value at March 31, 2020, approximately 50% of our guaranty is secured by GOL’s ownership interest in Smiles, GOL’s publicly traded loyalty program,” Delta explained in the report.

“Because GOL remains in compliance with the terms of its loan facility, we have not recorded a liability for the term loan on our balance sheet. However, as the Covid-19 pandemic continues to impact the global economy, there is an increased risk related to GOL’s ability to repay this term loan, which may require our performance under this guarantee,” it added.

Delta and GOL were strategic partners when the loan was made, but the US carrier sold its 9% stake in GOL in 2019, having reached an alternative deal with LATAM Airlines Group. LATAM filed for Chapter 11 bankruptcy in the United States on May 26.

The loan, plus a local bond of around BRL150 million reais (USD30 million) due in September, would use up almost half of what the risk assessment firm Moody’s estimated was BRL3.5 billion (USD700 million) that GOL had in cash at the end of April.