Brazil: Why Varig Airline’s Rescue Has Become an Impossible Proposition

Today judge Luiz Roberto Ayoub, of a Rio business court (8ª Vara Empresarial do Rio), will send a copy of the proposal by VarigLog to buy Varig to government legal officials (Ministério Público) and the Deloitte consultancy firm, which is the administrator appointed by the court.

Buying a troubled airline loaded down with problems and debt is never easy. To ease the sale, Varig was divided into two parts: a debtridden Varig Comercial, where the company’s liabilities have been placed (it is reported that Varig has debts totaling as much as US$ 3.5 billion).

More than 30% of the debt is owed to the Brazilian government (back taxes and social security contributions, mostly). This is an important point because last week government legal officials obtained a court injunction enabling them to move to the head of the line of creditors.

The other part of the old flagship airline is now known as Varig Operacional, and it is an attractive proposition as it has no liabilities, only Varig’s domestic and international routes.

Meanwhile, also last week, the union representing Varig employees went to court to question whether or not VarigLog is a legally eligible buyer under Brazilian legislation. Behind this maneuver is concern with another part of Varig debt: worker rights and benefits, not to mention salaries which are in arrears.

Also under analysis is the Varig frequent-flyer program, known as "Smiles." The question is if and how it will be honored by any buyer.

ABr

Tags:

  • Show Comments (2)

  • Guest

    Bankruptcy
    A couple points.
    1) the writer of the article is, I believe, in error. I read that it was a group of other airlines, Tam, Gol, etc. who were contesting Variglog’s ability to buy Varig given it’s foreign investment.
    2) To the responder above, that’s the only way they can sell any of Varig. No one would buy it with all the debts. This is fundamentally how it would work in the US if someone wanted to buy a company’s assets from the BK court.

  • Guest

    nice move
    Yep, the givernemt will get its money first ehehe and any one who is owed by varig, will be simply told that varig commercial cant pay….nice. I wish i could divide myself up into two, putting all debts an blame on my evil twin ehehehe

Your email address will not be published.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

Brazil: Sí£o Paulo and Rio Have Become Quite Expensive to Live In

Thanks to a strong appreciation of the Brazilian Real against the US dollar, São ...

Brazil’s Embraer Announces Firm Order Backlog Amounting to Record US$ 17 Billion

Brazilian aircraft manufacturer Embraer reports that its firm order backlog for the Commercial Aviation, ...

List of 2.900 Brazilian Officials Charged with Fraud Has Judges, Governors and Mayors

Brazil’s TCU (Tribunal de Contas da União), a Brazilian watchdog agency, which is actually ...

EU Promises Brazil It Will End Sugar Subsidies in May

In a note issued on Friday, October 28, the Brazilian Ministry of Foreign Relations ...

US$ 700 Million: Brazil Almost Doubles International Humanitarian Aid

The Brazilian government has substantially increased funds turned to humanitarian actions and operations for ...

When You Are a Rio Street Kid You Can Never Shut Your Eyes

Jefferson can’t remember exactly how his mother died. Homeless on the streets of Rio ...

World Bank Lends Record US$ 18 Billion to Brazil and Latin America

The World Bank Group (WBG) committed US$ 17.9 billion in fiscal year 2010 – ...

Brazil Greenlights Transgenics and Stem Cell Research

Brazil’s Chamber of Deputies ended the controversy over the cultivation of genetically modified seeds ...

Brazilian Named Top Consultant for Petrobras Work

BearingPoint, Inc., one of the world’s largest business consulting and systems integration firms, yesterday ...

Lula's brother, Genival Inácio da Silva

Brazil’s First Brother Caught in Police’s Latest Anti-Corruption Operation

Among the catches of Operation Checkmate, Brazilian Federal Police's latest anticorruption raid, was Brazil ...