UPDATE: Goldman Sachs Resumes Coverage on Gol Linhas Aereas Inteligentes SA with Neutral Rating, $20.60 PT Following Smiles Spinoff

In a report published Monday, Goldman Sachs analyst Tom Kim resumed coverage on

with a Neutral rating and $20.60 price target. In the report, Goldman Sachs noted, “Both LFL and GOL are debt laden and need to bolster their balance sheets. LATAM has already announced plans to issue up to $1bn in a secondary issuance, while GOL's effective leverage remains high even after the spinoff of Smiles, creating a potential share overhang, in our view. Our analysis suggests a recap would boost share performance, as interest savings could substantially improve net margins and EPS medium term. Based on our analysis, GOL could issue up to R$1.5bn in fresh equity that would significantly reduce the lease-adjusted debt to equity ratio while boosting EPS by 32% for 2014E.” Gol Linhas Aereas Inteligentes SA closed on Friday at $4.46.