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CaptW5
9th Jun 2006, 18:31
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Brazil's bankrupt Varig fails to sell at auction

RIO DE JANEIRO (AFP) - Brazil's 79-year-old flagship carrier Varig sailed
into limbo at auction after the bankrupt airline attracted a single bid, at
half the minimum price.

The price of Varig's preferred stock plunged 58 percent on the Sao Paulo
stock market after the auction to rescue it from liquidation drew a sole bid
from Participacoes, a group representing Varig employees, worth 449 million
dollars.

That was 48 percent below the minimum asking price of 860 million dollars
for the financially strapped airline's international and domestic routes and
52 aircraft.

But the airline's fate was held up after bankruptcy Judge Luiz Roberto Ayoub
said he would study the bid in the next 24 hours before deciding whether to
accept it.

Unions representing the airline's 10,600 employees and Varig's major
creditors have warned they would take legal action if the company's purchase
price is too low.

In the bidding Thursday, there were no bids during the first round in which
a minimum was set 860 million dollars. In addition to Participacoes, five
other groups were present: Brazil's discount airline GOL, leading carrier
TAM, and OceanAir; Aero-Lob controlled by Portugal's TAP, and a Canadian
investment fund.

A second round of bidding, for the airline's domestic routes and 30 aircraft
at a minimum price of 700 million dollars, also failed.

When the auctioneers then opened up for any bids, Participacoes stepped
forward with its cut-rate offer for all of Varig's assets, Varig
Operacional.

Ayoub has 24 hours to decide whether the price is fair. If he accepts it,
Participacoes must deposit 75 million dollars within three days to put the
sale on track.

Varig is saddled with debt of more than three billion dollars and has been
operating under bankruptcy protection for a year.

Sixty-five percent of that debt is owed to public services like airports
authority Infraero and fuel distributor BR Distribuidor. The company also
owes more than one billion dollars in unpaid taxes.

Varig Operacional would be sold debt-free, its debt assumed by a company
called Varig Relacionamiento.

The beleaguered airline recently has failed to honor contracts on leased
aircraft, which make up 80 percent of its fleet.

Milton Zuanazzi, president of the nation civil aviation office, said Varig's
sale was not over and so there is no need to speak of what will happen if
the offer is rejected.

"We are not going to talk about contingencies because the sale is not
closed," he said.

Founded in 1927, Varig, or Viacao Aerea Rio-Granadense, became the face of
Brazil in the skies in the 1970s when it won a monopoly on international
flights.

Its 111 agencies worldwide became virtual embassies for Brazilian travelers
and international sales represented 70 percent of revenue.

But Varig began to mark up losses after the government froze airfares
between 1986 and 1991 to combat runaway inflation. The airline has taken
court action to seek compensation for the estimated two billion dollars in
losses from that decision.

Varig was Brazil's leading domestic carrier until it was overtaken more than
two years ago by TAM. Last year it lost its second-place ranking to low-cost
competitor Gol.

Varig now has only a 16.7 percent share of the domestic market but remains
the country's leading international carrier, with a 66.4 percent share on
external routes.

alemaobaiano
12th Jun 2006, 13:52
According to the radio news this morning there is a serious problem with the bid by Trabalhadores do Grupo Varig (TGV). The credits that they plan to use to part-finance the purchase actually belong to individual workers and not the group as a whole and the union representing these workers is going to court to prevent the TGV using this option. That would essentially sink the bid as TGV doesn't have access to additional funding.

The situation doesn't look good for Varig.

alemaobaiano
13th Jun 2006, 11:04
In the news this morning the judge has accepted the offer from TGV, with conditions. TGV have 48 hours to prove that they actually have the finance to make the purchase, otherwise the sale will be cancelled.

broadreach
21st Jun 2006, 17:21
Newspaper today (21 Jun) reports that TGV have until "next Friday" (not sure if that's the 23rd or the 30th) to come up with promised US$75 million but that there are serious doubts in the industry as to whether the money will materialise. ILFC, Boeing and GATX are in the process of reclaiming 22 of their aircraft and that seven of these 737-300s/700s/800s are to be taken on by Gol. Nissho Iwai (2x767) and Central Air (5xMD-11) are expected to move to arrest those assets.

Varig cancelled 118 flights yesterday, over half of their total, and are cancelling all international flights except Frankfurt, Madrid and London by this Friday 23rd.

Makes you want to cry. Good luck to all those crews and staff, who have shown remarkable stoicism and loyalty throughout.

malagajohn
21st Jun 2006, 17:57
Newspaper today (21 Jun) reports that TGV have until "next Friday" (not sure if that's the 23rd or the 30th) to come up with promised US$75 million but that there are serious doubts in the industry as to whether the money will materialise. ILFC, Boeing and GATX are in the process of reclaiming 22 of their aircraft and that seven of these 737-300s/700s/800s are to be taken on by Gol. Nissho Iwai (2x767) and Central Air (5xMD-11) are expected to move to arrest those assets.
Varig cancelled 118 flights yesterday, over half of their total, and are cancelling all international flights except Frankfurt, Madrid and London by this Friday 23rd.
Makes you want to cry. Good luck to all those crews and staff, who have shown remarkable stoicism and loyalty throughout.

The cash has to be lodged by Friday the 23rd

The betting in Rio is that the cupboards are bare and the judge will look for a creative solution.

Meanwhile , it looks like GOL and TAM will divide the routes between them

broadreach
25th Jun 2006, 03:25
As anticipated, TGV did not come up with the US$75 million on 23 June. Now it seems the government are in favour of letting VarigLog, the parcels subsidiary Varig sold off in December for $48 mio to a group backed by Matlin Patterson, have a shot. VarigLog have been waving an offer of $495 million about, with all sorts of conditions. Resistance to their offer seems mainly based on the backing being foreign (sorry if I oversimplify, I do realise that may be just an excuse).

Lawyers are making a fortune out of this. I at least certainly do hope there's a way to get the company seriously back into the air again, and not as a tropical copy of the PanAm novel either.

CaptW5
20th Jul 2006, 22:05
http://news.bbc.co.uk/1/hi/business/5199288.stm

Troubled Brazilian airline Varig has been sold at auction to an investment group for $24m (£13m).
Volo de Brasil was the sole bidder for the national carrier which has been running under bankruptcy protection.

Volo, which already controls Varig's cargo business VarigLog, is expected to split the business but keep most of the routes and planes.

An earlier sale to an employee group collapsed because the consortium missed a payment deadline.

Volo will not inherit Varig's debt of about $3.1bn - but will have to commit to a series of payments.

'Reborn'

Once Latin America's largest flag carrier, its perilous financial situation has forced it to cancel hundreds of flights and suspend services to 10 cities, including New York and Paris.

The 79-year-old airline has been subject to bankruptcy protection for more than a year.

But Varig's chief executive officer, Marcelo Bottini, said: "We have shown all the doubters that Varig has a future. Today, a new Varig is reborn."

Volo could axe about four-fifths of Varig's staff, according to documents lodged with auction officials, trimming the workforce from 10,000 to 2,000.

The sale must now be approved by Brazil's Civil Aviation Agency.