Varig’s Eleven: 11 Bidders Interested in Bankrupt Brazilian Airline

Eleven companies have shown interest in acquiring the routes, planes and offices of Brazil’s embattled Varig airline, the carrier said.

Potential bidders include local companies TAM SA, Gol Linhas Aéreas Inteligentes, OceanAir and WebJet, as well as Aero-Lb, a consortium including Portuguese airline TAP.

Varig opened a data room, where interested parties can review the company’s business records ahead of Tuesday’s (June 6) auction.

Varig – Viação Aérea Rio-Grandense – has been struggling for years, with debts of about eight billion Brazilian reais (US$ 3.5 billion).

The proceeds of the auction will be used to pay debts on operating expenses to allow the airline to continue flying. The auction, originally scheduled for July, was moved ahead because the airline was in danger of shutting down.

Varig’s domestic and international operating assets – which include a fleet of 72 jets, of which only 47 are in operation – will be put up for sale for a minimum price of US$ 860 million.

The buyer would form a new company, leaving most of the company’s debts with the old company.

As a second option, Varig could auction off domestic routes for a minimum price of US$ 700 million, again leaving the debt with the old company, which would also remain responsible for international operations.

However, if no bid comes within 10 percent of either minimum price, a second round of bidding will be held with a reduced minimum price of US$ 125 million.

But creditors are considering legal action to block the sale, which could scare off potential investors, analysts said.

The National Airports Authority Infraero, federally owned bank Banco do Brasil and BR Distribuidora, the distribution wing of state-controlled oil giant Petróleo Brasileiro, or Petrobras, contend that the second-round minimum price is insufficient to pay off Varig’s operating debts.

Meanwhile, foreign-based leasing companies are pressuring a New York court to allow them to repossess their planes currently in Varig’s service. Judge Robert Drain of a U.S. Bankruptcy Court in Manhattan was to rule yesterday whether leasing companies can seize their planes from Varig.

And federal prosecutors have appealed a court decision that the government must pay Varig 4.5 billion reais (US$ 1.96 billion) in compensation for losses arising from airfare price controls between 1986 and 1991.

Varig remains Brazil’s leading airline on international routes, but has fallen behind TAM and Gol domestically as cash-flow problems have forced it to reduce operations.

Mercopress – www.mercopress.com

Tags:

  • Show Comments (0)

Your email address will not be published. Required fields are marked *

comment *

  • name *

  • email *

  • website *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Ads

You May Also Like

LETTERS

Rich and powerful to the point of arrogance, when it cannot beat the competition, ...

Paraguay Tells Brazil: We Don’t Want a Friendly Hand. But Justice and Our Money

Fernando Lugo, the president of Paraguay, said he is looking forward to the coming ...

Brazil and Spain Sign Pact to Fight Organized Crime

The ministers of Justice of Brazil, Márcio Thomaz Bastos, and Spain, Juan Fernando López ...

Grilled for 9 Hours in Congress, Brazil’s Finance Czar Denies Any Wrongdoing

During nine hours of testimony before the Brazilian Senate’s Commission on Economic Affairs, Wednesday, ...

In Brazil, Diplomas Don’t Open Doors for Women

Gender equality in Brazilian science is increasing up to doctorate level but few women ...

3% of Brazil Forest Get Green Seal Certification

Approximately 1.5 million hectares, equivalent to 3% of Brazil’s native forest, possess quality certificates, ...

Brazil Pays Off US$ 3 Billion of Foreign Debt

Brazilian stocks moved tentatively higher, as investors refrained from significant buying prior to the ...

Brazil-Emirates Direct: Brazilians Get Fast Access to Arab World

The direct flight that Emirates Airline, of the United Arab Emirates, will inaugurate in ...

From Cabaret to Syllables

The partnership between Caetano and Gil is one of the most fertile and lasting ...