UPDATE 1-Brazil's Gol Airlines pulls planned bond offering

(Adds details and reaction throughout)

By Joan Magee

Feb 16 (IFR) - Brazilian airline Gol Airlines pulled its new perpetual non-callable three senior unsecured note on Thursday, something many in the market expected.

The bond had a minimum size of US$100m, with initial price guidance of 11.50%, "a big, sexy yield," said a senior DCM banker in London, but not enticing enough to make it past the finish line.

"This high-yield stuff isn't so easy to sell," said a banker in Sao Paulo.

Market participants had been predicting all week that the Gol deal may not make it, as investors were skittish given the pricing of the transaction.

"This should be have been 100bp wider," said a senior trader in New York. A local Brazilian investor called it expensive compared to the outstanding perpetuals. "The company should have retapped the outstanding perp, giving investors a lower US dollar entry point and adding liquidity in the [highly illiquid] old perp."

Meanwhile, the usual suspects interested in Latin American perpetuals, such as Asian investors and some European retail investors, weren't biting right away it seemed, according to a senior DCM banker in New York. So when the deal wasn't on its way to pricing early New York time, it didn't bode well.

"They offered the same concession as other high-yield issuers, but the fact that good high-grade names could be coming, coupled with digestion of the last [few deals]," contributed to some smart investors seeing "blood on the streets and asking for a higher yield to get into it," said a local Brazilian banker.

After the news that the deal was pulled, the outstanding Gol perpetuals ticked up a point, to 82.00-83.00 from 81.00-82.00. Looking at comparables, Tam Airlines 2020s were up 50ct to 109.50-110, while the Tam 2021s were up US$1.00 to 105.00-105.50.

The issuer was to have been Gol's subsidiary Varig Linhas Aereas and the bonds would have been guaranteed by Gol Linhas Aereas Inteligentes. JP Morgan was the sole lead bookrunner. (Joan Magee is an IFR reporter in New York)