CVC Brasil Operadora e Agência de Viagens S.A. (CVCB3) Earnings Call Transcript & Summary

Good afternoon and thank you for waiting. You're welcome to CVC's teleconference to discuss a relevant fact disseminated on November 19 on the restructuring of the debt of the company. Today, we have with us Mr. Leonel Andrade, CEO; Mauricio Montilha, CFO; and our IR Director; [ Andro ] Eduardo Neves, Planning Director, Treasury and Investor Relations. This event is being recorded. [Operator Instructions] This event is broadcast via Internet and may be accessed at www.cvc.com.br/ri, where the presentation is available. Slide presentation is controlled by you. The replay of this event will be made available right after the event. Event declarations made during this teleconference regarding CVC's, projections, financial goals are based on beliefs of the company as well as the information currently available to CVC. Future considerations are not a guarantee of performance and are based on assumptions. And since they depend on future events, these circumstances may or not occur. Investors and analysts should understand that general facts may affect CVC's future results, and the results will differ materially when compared to those anticipated. And now I turn over to Mr. Leonel Andrade, CEO, who is going to start the presentation. Please, Mr. Leonel, proceed.

Thank you very much. Good afternoon, everyone. I'm going to make a very brief introduction. First of all, I would like to thank you and leave a message for the future of the organization. I have been heading the organization for seven months. In these last 7 months, we have gone forward with our internal issues and have been able to develop consistent work to regulate the accounting of the company. And we have also been able to substantially change our team. We're going through a cultural change as well. We have created a series of new controls for the company. We are restructuring our governance, compliance and monitorship. We have restructured our clients in [ risification ] area. And now we concluded with a renegotiation of our debentures. The main topic to be discussed today is this renegotiation. And I'd like to highlight that based on everything that has been done, we are ready to resume our activities, to be close to our clients, our partners, our providers, vendors, shareholders and you, analysts and investors. Be it in equity or in terms of debt, we're going to be close. I'm here to tell you that our agenda will change substantially from now on. We have had significant internal upgrades, are resuming activities in the market. And of course, our conditions are far from being optimal, but our business is being resumed, especially because of the amazing capacity to operate in the Brazilian domestic market, our absolute leadership. We have a huge potential. Our vision is a lot more optimistic. And of course, I would also like to thank our shareholders for their unconditional support by means of the capitalization that was made and also the upcoming capitalizations, which will help the company to have a high capacity to continue operating. I actually believe that this will be transformed into a competitive advantage as we have cash to honor 100% of our commitments with our clients. We will also be able to honor 100% of our commitments with banks, employees, government taxes. I'm very proud to say that we're perhaps one of the few or perhaps the only tour company that has 100% of its commitments updated. We do not have BRL 0.01 of undue payment with our creditors. 100% of our payments are due, and we have robust cash for the future. I thank you very much. I also thank our financial team. The financial team is coordinating with us. I'm going to turn over to Mauricio Montilha, our CFO. Since he arrived here -- and actually, he was the one who raised the company's accounting problem, and he's working with a new group, which is committed with the company. I would also like to tell you that I'm very proud to be here for a long-term project. I would like to assure you that both from my point of view and from the point of view of my team, our commitment is for the long term. We will be here in the upcoming years. We will be able to carry out all of the transformations required by the company. We will lead the market in resumption of tourism so that the company is profitable and 100% transparent. It is our duty to guarantee that we will not have the same kind of problems and that you, as investors in general and shareholders, are confident. And to wrap up, I am available -- and now with a lot more emphasis, I'm available to be with you, personally to be with you in any event, both individually and collectively, should you need any clarifications or talk to me to discuss the future of the company and the company's performance. I thank you all. I will be here listening. And I will turn over to Mauricio Montilha. Good afternoon and thank you very much. Montilha, please.

Thank you, Leonel, for your words. In fact, this is a very important moment for us. I will quickly talk about the changes made, and then Eduardo will talk in detail about the cash flow details. As Leonel mentioned, it is very important for us to have concluded this renegotiation. We needed to realign the covenant and some payments according to the new reality, which is the resumption of business. This took place on November 19. We had a waiver, of course, which was not compliant with we -- have to highlight that we have a new covenant structure, which is adjusted to the resumption of business activities of the company. And therefore, we have a debt with Citibank. It did not have any significant changes in terms of due date. We have had some changes in the amortization and a realignment of interest rates and covenants as well. On Page 3, we have some more details. Of course, this is adjusted with the new interest rates, and the rates has gone up. Our CDI is plus 3.5%. For the long term, it is 4.5%, with a step-up as of September 2021. It's important to note that the company is free to make prepayments in the future and especially of the longer series. On Chart #4, as I mentioned, we have readjusted the covenant regarding the resumption of business activities. And this was one of the essential elements when we discussed with our creditors. Next year, if you compare to 2019, we will be on an increasing curve. And then in '22, we believe that it will be very similar to 2019. And the market will be normalized at the end of '22. So our covenants in the short term are in terms of net debt. And then we have 1 year of covenant still in a growth period of the company and resumption of our business. The covenants are related to our net equity and the company benefits from capital increases. And then as of '23, we go back to a more flexible covenant for the normal covenant of this debt structure, which is lower than 3.5x. We have been very successful with this realignment. We have received the support of our shareholders so that we can go back to normal. The last comment, before I turn over to Eduardo, is that in this discussion process, the company made a commitment to have a liquidity event with a capitalization of at least BRL 800 million. This amount of the subscription bonus with a maximum value of BRL 401 million related to the capital increase will be deducted from the total amount. And the company will try to update these amounts. And if we do not have this capitalization, there are some conditions: for the short term, we will keep payments; and for the long term, if we do not have the capitalizations, they become convertible instrument in shares from that date on. The renegotiation and the commitments taken by the company, by the Board of Directors, make the company a lot more solid, more resistant. The company is free to resume its activities. Payments are aligned with cash generation and capitalizations, some by January '21, and even so, for the long-term events, they may be converted into capital. And therefore, we have a solid guarantee that we'll be able to continue operating. And we have also received a vote of credibility from our creditors. I'm going to now turn over so that we can talk about the schedule.

Thank you, Mauricio. So moving on in Slide 6, you can see the new payment schedule according to the debt in this scenario. We have the BRL 400 million of the subscription, which will take place until January next year and also the additional to add up to the BRL 800 million. It's important to highlight that except for CVC12 (sic) [ CVCB12, ] whose payment date was changed from November this year to November next year, all the other payments are with the same date and -- except for CVCB 12, which received is 55% of the total, we have approximately BRL 636 million. And then on the first line of the table here, you can see the monthly payments as of March '21 until November '21, when we also have a final installment where the debt will be paid off. CVC13 (sic) [ CVCB13 ] will have an amortization of BRL 50 million in March. And then with a similar format, we will have amortizations starting in July, ending in March '22. And now moving on to Slide #7. We show you what the amortization scenario is going to be like. This amortization schedule includes the capitalization of the subscription bonus and the impact it will have on our debt. As this is observed and when this takes place, CVCB12 will have its balance paid off in February. We have a payment of BRL 257 million. And that also changes the amortization schedule of CVCB13. It will have a payment of BRL 90 million and no longer BRL 57 million and then another payment, another final payment to take place in March '21 or whenever the liquidity event is concluded. And so with the BRL 800 million of capital increase by September '21, we will pay off the remainder balance of CVCB13 with BRL 90 million in October and also 10% of the other debts. The other debts have the same payment date, CVCB14 in April and CVCB24 with payments as you can see here on the slide, and we'll have anticipated amortizations as I mentioned. And then finally, in the last slide, what is the payment schedule in a scenario where we do not have the increased capital but it will take place by September 2021 when we will have the payment of the BRL 800 million? So CVCB12, as of March, will have monthly payments with payments in October, right after the liquidity increase. And likewise, CVCB13, you can see that because CVCB13 did not have a capitalization in January, it will have monthly payments as of July. And then we pay off in October. So nothing changes regarding the other debts, and the liquidity event will be concluded with BRL 800 million by September. And the other ones will have an amortization of 10% of the principal balance on the date, with no changes to the original maturities. With that, we close our presentation, and I now open for Q&A. Thank you very much.

[Operator Instructions] We have a question from the [ ABC Bank. ]

I thank you very much for the initiative to hold this teleconference. I would like to confirm with you 2 important aspects here. The first one is whether CVCB24 has two installments. I -- there is only one installment showing. And I have another question as well.

Thank you, [ Roberto, ] for your question. CVCB24 has 2 amortizations. 50% of the original balance in April '24, and the remainder, April '25. I believe that we only have in writing that the original payments were maintained. So in our minutes, we will have a payment this year and then another one with the balance in the original payments. And perhaps that's why you have this question.

That's perfect. The other question is what the liquidity event will be like in the case of subscription? If we have increased capital, will it be enough? Or will it be BRL 400 million plus BRL 800 million and then BRL 1.2 billion in the end?

The total increase is BRL 800 million, of which BRL 400 million are regarding the subscription bonus, with an additional BRL 400 million.

[Operator Instructions] We now close the Q&A session. I would like to turn over to Mr. Mauricio Montilha for his final considerations. Please proceed, Mr. Montilha.

Thank you very much. First of all, I'd like to thank you all for participating in this meeting. As I mentioned and as Leonel mentioned in the beginning, we're very happy because this important phase of the company has been concluded. Our plan is very coherent. We have a lot of flexibility to move on with our plans and to lead the resumption of business in Brazil. It also demonstrates that our creditors are confident and have decided to transform this debt into capital. We're 100% prepared, as Leonel said. We have kept our competencies, our relationships, and we are now 100% prepared to resume. And we're hoping that other solutions will help the market to resume, be it in terms of vaccines or other activities that will help us resume our market sooner. We're hoping to lead to this process. I thank you for your time. And I wish you all a very good afternoon.

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