Embraer, airlines hire advisers to discuss government support, restructuring: sources

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SAO PAULO (Reuters) – At least two Brazilian airlines and planemaker Embraer SA (SA:EMBR3) have hired investment banks to help with talks with state development bank BNDES for government support, sources with knowledge of the matter said.

Embraer has hired Itau BBA, the investment banking unit of Itau Unibanco Holding SA (SA:ITUB4), two sources said.

Embraer is seeking credit lines between $1 billion and $1.5 billion after a deal with Boeing Co (N:BA) fell through.

Brazilian newspaper O Estado de S. Paulo reported earlier on Wednesday that Embraer hired Itau BBA.

Embraer and BNDES did not immediately respond to requests for comment.

Itau BBA is also advising airline Azul SA (N:AZUL) on negotiations with BNDES, two people with knowledge of the matter said. Azul did not immediately comment. Itau declined to comment on both mandates.

Azul had hired previously restructuring specialists for talks with its creditors, including banks, suppliers and lessors of its planes. All payments were suspended. Restructuring boutique Galeazzi & Associados is leading the restructuring work at Azul.

Santiago-based Latam Airlines Group SA (SN:LTM) has retained investment bank Banco BTG Pactual SA (SA:BPAC3) as adviser on talks with BNDES, two of the sources added, mainly focused on discussing on the convertible debt equation.

Both Azul and Latam Airlines did not immediately respond to requests for comments.

BNDES is expected to finish this month negotiations with airlines and Embraer for a rescue package that may reach $2.5 billion.

Most of it is likely to be provided by BNDES, as private lenders have been resisting extending loans to airlines, an industry in which their current exposure is small, two sources said.

BNDES was initially considering conceding loans to airlines equivalent to half of the amount they require, which is around $2 billion, with the remaining part been provided by Brazil’s largest lenders, such as Banco Bradesco SA (SA:BBDC4), Itau Unibanco Holding SA (SA:ITUB4) and Banco Santander (MC:SAN) Brasil SA (SA:SANB3). Banks, however, rejected the plan and all parties are trying to reach an agreement.

BNDES support package to airlines will mix credit lines with convertible instruments that may give the bank a stake in the companies.