Two Courts, in Brazil and US, Decide Today Bankrupt Varig’s Future

    A director in Brazil’s union of workers in the aviation sector  (SNEA), Anchieta Helcias, declared that the sale of Varig LogÀ­stica (VarigLog), a former subsidiary of Varig, to an investment group, Volo Brasil, did not comply with Brazilian legislation.

    Although the sale took place at the end of last year, only on Friday, June 23, was it approved by the ANAC the civil aviation agency (Agência Nacional de Aviação Civil.

    Helcias claims that the participation of a foreign investor, the US Matlin Patterson investment fund, in Volo Brasil is greater than the 20% permitted by Brazilian law.

    Helcias also says there are problems because only a cursory examination of Volo Brasil’s economic/financial situation was made.

    The reason for the jockeying by the union and ANAC at this moment is the impending formal proposal by VarigLog (read: Volo) for the acquisition of Varig itself.

    Meanwhile, and this is what really counts, Volo Brasil continues to pump money into Varig, keeping Brazil’s flagship airline operating, although precariously.

    Varig is paying cash on the line for fuel and fighting off leasing companies that seek to arrest its aircraft. Volo has promised US$ 20 million to keep Varig flying until another auction can take place.

    A new auction will be necessary, if Varig creditors agree, following the failure of the winners of the June 8 auction to make a mandatory deposit, thereby invalidating the auction.

    Further muddying the situation is legal action taken by government tax collectors and social security system agents to confiscate any payments made by a Varig buyer.

    Decision

    Two courts, one in Brazil and the other in the United States, will decide if it will be possible for Volo Brasil, through its subsidiary, VarigLog, to buy Varig. The decisions are expected today, June 28.

    In Rio de Janeiro, at a business court (8ª Vara Empresarial do Rio), judge Luiz Roberto Ayoub, is supposed to emit a definitive decision on the proposal by VarigLog to buy Varig.

    In the United States, judge Robert Draian, of the New York Bankruptcy Court, has scheduled a hearing today on the arrest of Varig aircraft by leasing firms.

    ABr

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