SAO PAULO/RIO DE JANEIRO (Reuters) - Embraer SA (EMBR3.SA) said on Monday it had secured a $600 million loan, partly backed by Brazil’s government, at the same time as a key executive departed the planemaker weeks after a potentially transformational deal with Boeing Co (BA.N) fell apart.
John Slattery, who headed Embraer’s commercial aviation unit, will become chief executive of aircraft engine-maker GE Aviation (GE.N).
Slattery had championed the $4.2 billion Boeing-Embraer agreement, and was set to become a Boeing executive in charge of the Embraer partnership once the deal closed for Boeing to take control of Embraer’s commercial planes unit.
But the deal fell apart in April, as the coronavirus ravaged the travel industry, leaving both companies pointing fingers at each other.
Embraer was left looking for new liquidity. The $600 million loan will be split half and half between state bank BNDES and private banks, the planemaker said.
Under the agreed-upon terms, Embraer will not be allowed to lay off any employees for two months after receiving the loan, said Marcos Rossi, a BNDES executive in charge of aerospace and defense deals, among other industries.
The loan has come together quickly in Brazil, where airlines and automakers have been scrambling to finalize a bailout deal. Both sectors have been clamoring for state help since March. Embraer began negotiations in late April.
Companies from both industries have balked at BNDES’ requirements, which were significantly more favorable in Embraer’s case. While BNDES has demanded airlines put up equity collateral and automakers secure loans with a pledge from headquarters.
Yet the state bank did not require equity from Embraer, which has more cash and less debt than Brazil’s airlines and automakers, sectors dealing with years of losses.
“People associate Embraer with commercial aviation, but it also has other sources of revenue like executive jets and defense. That’s a good competitive factor,” said Rossi, explaining why BNDES was eager to reach a deal with Embraer.
To replace Slattery, Embraer said it was promoting Arjan Meijer, chief commercial officer of its commercial unit, to lead the division.
Slattery joined Embraer in 2011 and in 2016 became head of commercial aviation, Embraer’s most profitable division.
Reporting by Marcelo Rochabrun; Additional reporting by Rodrigo Viga Gaier in Rio de Janeiro; Editing by Brad Haynes, Jonathan Oatis and Rosalba O'Brien