MercoPress. South Atlantic News Agency

Judge approves sale of Varig to employees

A Brazilian bankruptcy judge approved on Monday an offer by an employee-led group to buy Varig, Brazil's flag air carrier after getting guarantees the buyers have enough money to finance the transaction.

Judge Luiz Roberto Ayoub cleared the bid for the carrier's assets provided the group, NV Participacoes, pays Varig 75 million US dollars within 72 hours as a part of 125 million of cash in offer. The money will be used to make back payments on aircraft leases in an effort to avert seizure of more than half the airline's fleet.

"They have 72 hours to resolve this problem or we will be back to this confusing situation,'' Ayoub said during a news conference in Rio de Janeiro.

Ayoub approved the proposal more than ten days after holding an auction of Varig's assets to help generate enough cash to keep the airlines planes flying. Delays in approving the offer may cause Varig to ground several aircrafts because of lack of payment to its suppliers, revealed Marcio Marsillac, NV's CEO.

The carrier has now 49 working aircraft and that may fall to 30 in coming days, Marsillac said.

The group, formed by Varig's pilots and fight attendants, won its approval after presenting the judge with two unnamed investors, Marsillac said. Rio de Janeiro-based NV, the sole bidder during the auction, offered 449 million US dollars for Varig's international and domestic airline operations, 125 million of which was cash.

Ayoub had said the group needed to more than double its cash offer to win approval or present guarantees it could come up with the money, according to a Varig filing in U.S. bankruptcy court last week.

Marsillac will meet Brazilian government representatives to help obtain 150 million US dollars from the Brazil's development bank to fund Varig's working capital, Marsillac said.

The Brazilian government said last month the BNDES would finance as much as two thirds of the purchase price for the carrier's assets.

"Let's hope this marvellous group of people from this marvellous company can save Varig", said Judge Ayoub who all along indicated he wanted to save the air carrier from bankruptcy and dissolution.

Varig's debts amount to 3 billion US dollars and the cash strapped company has been unable to pay suppliers and the 10.600 staff. Last week it was forced to suspend 230 domestic and international flights.

Founded in 1927 Varig rapidly became identified as Brazil's main international airline. However from 1986 to 1991 the government froze air rates, in spite of hyper inflation, and in 1991 Varig lost its international monopoly. Varig is suing the government for losses generated during that time.