Rio de Janeiro, Brazil – A group of employees made the only bid at Thursday’s auction here of the assets of bankrupt Brazilian airline Varig, offering nearly $450 million for the once-proud flag carrier.
The magistrate overseeing the bankruptcy, Luiz Roberto Ayoub, has 24 hours to study and then accept or reject the proposal, which put off the potential separate sale of individual Varig domestic routes and other assets.
Five companies participated in the auction, which took place at Rio de Janeiro’s Santos Dumont airport and was attended by roughly 1,000 people.
None of the firms submitted a bid in the first phase of the auction, in which a minimum bid price of $850 million was set for all of Varig’s assets, or $700 million for everything excluding the airline’s international operations.
With no offer made, a second phase ensued with no minimum bid price. But only NV Participacoes – a firm representing Varig pilots and flight attendants – came up with a bid, making an offer of just over 1 billion reais (slightly less than $450 million).
That bid proposal only stipulates the payment of some $126 million in cash, with the remainder consisting of Varig’s pending obligations to its roughly 11,000 employees.
Union official Marcio Marsilac was the one responsible for submitting the offer in a sealed envelope in the name of NV Participacoes.
Asked by EFE about how the employee consortium would come up with the money to purchase Varig, Marsilac said his group would not offer “any type of information” or comment on the matter.
NV Participacoes “is a shell company,” said one source who insisted on anonymity, adding that it was unlikely that the group cold come up within three days with the $75 million deposit that, according to the terms of the auction, is needed to keep the airline running and generate cash flow while the sale of the company is completed.
Following the below-minimum bid, the share price of the beleaguered airline plunged more than 40 percent by mid-afternoon Thursday.
At a press conference following the disappointing results of the auction, Judge Ayoub refused to commit on the lone bid, but ruled out that Varig would be re-auctioned. He added that, if the employees’ offer is rejected, Varig could be declared completely and definitively insolvent, according to the “cold letter of the law.”
“That doesn’t mean to say the interpretation of the law leads me to that,” he said, adding that he still has not come to a decision and still trusted that Varig would continue to fly its routes.
Varig, which operates almost 70 percent of the international flights departing from Brazil and 16 percent of domestic traffic, has roughly $3 billion in debt.
