Brazil’s Varig Repays Part of Debt in US Court and Delays Bankruptcy

Brazilian bankruptcy-bound airline Varig informs that, pursuant to a ruling by the Court of New York, it deposited US$ 6.7 million, Wednesday, December 28, in partial payment of debts owed to US firms from which it leases some of its fleet.

The settlement was reached on December 21 at a hearing attended by the president of the company, Marcelo Bottini, and representatives of the leasing firms. The sum will be divided among the 15 airplane lessors.

Judge Robert Drain, of the Court of New York, decided to extend the legal protections on Varig’s planes until January 13. The grounds for the judge’s decision were that the Brazilian company had complied with Brazilian court rulings to present a Recovery Plan approved by its creditors, had reactivated aircraft that were out of service for maintenance, and had submitted a schedule for repaying its debts to the leasing firms.

According to the company’s press office, Varig plans to return to the Court of New York on January 13 with proof of the payments already made to the leasing firms. The company owes the leasing firms a total of US$ 44 million and expects to make good on US$ 19.7 million by the time of the next hearing in New York.

On January 8, Varig expects to present its recovery plan, backed by its creditors, to the 8th Business Court of Rio de Janeiro.

It was announced earlier this week that Varig will end on January 14, 2006, services to Japan via Los Angeles, as a measure to cut expenses. The air carrier has been placed under bankruptcy protection since June.

On January 14, the airline will end its service from São Paulo to Tokyo via Los Angeles as well as cut the number of employees at its Japanese offices and close other offices in Asia.

The company will keep its São Paulo to Los Angeles route, which is still profitable, but will trim the number of its employees in the Tokyo office and close other offices in Asia.

ABr

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