Brazilian authorities decided to advance to June the auction of Brazilian flag carrier Varig in a final effort to ward off the airline’s collapse, announced the National Civil Aviation Agency, ANAC.
The beleaguered airline burdened with debts of over US$ 3 billion is currently under court supervised bankruptcy reorganization.
ANAC said an official announcement on the new auction date (originally July 9) would be made early next month.
"Only the judge in charge of the bankruptcy process can decide the exact date, because there are a host of legal proceedings that must be followed" said ANAC spokesperson.
The sale must be accelerated since "what is certain is that (Varig) cannot survive until July" and creditors have stepped up pressure on the airline, admitted the spokesperson.
The sale of what was once Brazil’s largest and most emblematic airline is being sped up following BNDES, (National Development Bank), rejection of requests for bridge loans by three companies interested in taking over the flag carrier.
"Those companies did not fulfill the minimum criteria to qualify for the loan and the situation became more difficult, that’s why the auction has been advanced."
A loan injection from BNDES would have allowed Varig to continue its operations and generate cash flow.
But Varig is also under bankruptcy proceedings at a New York court, which next Wednesday could order the seizure of the airline’s planes because of over US$ 20 million in arrears to leasing companies and other U.S. creditors.
Last May 8 a creditors’ assembly in Rio de Janeiro approved the sale of Varig’s assets and operations, either in full or on a partial basis.
The debt would be left in the hands of a separate company. U.S. consulting firm Alvarez & Marsal, which was hired to advise the airline as it undergoes the restructuring process, admitted that it was seeking funds to ensure the carrier’s continued operations.
"Varig is working to get some emergency money, between US$ 40 million and US$ 100 million so it can operate until the auction," said consultant Marcelo Gomes.
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