Brazil's Embraer candidate for loans up to $1.5 billion after failed Boeing deal – sources

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SAO PAULO (Reuters) – Brazilian planemaker Embraer (SA:EMBR3) may obtain credit lines between $1 billion and $1.5 billion from the country’s development bank, BNDES, and other lenders after a deal to sell its commercial aircraft division to Boeing (N:BA) fell through, two sources close to the matter said on Friday.

Proceeds from the loan would be used as working capital and export finance, the sources said, asking for anonymity because the negotiations remain private. Embraer may also be included in a relief program for national airlines affected by the COVID-19 pandemic, they said.

Last week, Boeing announced the cancellation of a 2017 agreement to buy control of Embraer’s commercial jets division for $4.2 billion, raising doubts about the Brazilian company’s future and motivating it to commence arbitration proceedings against the U.S. company.

“Embraer was not contemplated in our efforts to help the airline industry. … Then there was the issue with Boeing and it became a candidate” for support, one of the sources told Reuters.

The source said there is consensus among a bank syndicate including the BNDES that Embraer would be eligible for financial aid, noting talks are in an early stage.

Having a dispersed ownership structure, the loan structure could involve an instrument that is convertible into company stock, the source said.

BNDES and Embraer declined to comment.

When Boeing canceled the agreement, Embraer had stated the company would adopt measures to preserve liquidity and keep a solid financial position, alluding to “turbulent times.”

Embraer’s commercial aviation chief executive, John Slattery, on Friday said the company had incurred pain and costs in separating jetliners from defense and business-jet activities in preparation for the deal with Boeing, including a loss of deliveries in January.