Rio De Janeiro, Brazil – A judge on Monday approved the sale of Brazil’s embattled flagship airline Varig to an employee group, staving off the immediate threat of the company’s liquidation.
Judge Luiz Roberto Ayoub approved the $449 million bid made at a June 8 auction by Varig workers group TGV. The bid was well below the auction’s set minimum of $860 million.
Ayoub had delayed approval of the bid due to questions over the structuring of the deal and TGV’s solvency.
But the group convinced the judge it had the funds and investors necessary to buy the airline’s assets, according to a statement from the court, which did not identify the investors.
TGV now has 72 hours to make an initial deposit of $75 million.
If the payment is not made the auction will be declared null and void, the statement added.
Varig has been canceling around 20 flights daily as the bankruptcy proceedings drag on, though the airline has said the cancelations are due to bad weather and regular plane maintenance.
Varig has been in financial trouble for several years amid mounting debt of about 8 billion reals ($3.5 billion. It has been under protection from its creditors since June 2005, when it became one of the first companies to use Brazil’s new bankruptcy law, similar to U.S. Chapter 11 proceedings.
Its fuel supplier, the state-run BR Distribuidora, has warned it may stop dealing with Varig.
A New York bankruptcy court determined Friday that Varig must return nine airplanes to International Lease Finance Corp., or ILFC, for nonpayment of rent and vital servicing.
Varig remains Brazil’s main international carrier but has fallen behind TAM and Gol in the domestic market.
