Judge Postpones New Varig Auction Indefinitely

The judge said that he will schedule a meeting with creditors only after prosecutors have ruled on whether a new auction should be held.


A judge has indefinitely postponed a new bankruptcy auction for Brazil's flagship airline Viacao Aerea Rio-Grandense SA, or Varig, and suspended a creditors' meeting that was to consider a bid for the embattled carrier.

Judge Luiz Roberto Ayoub said in a statement Wednesday that he will decide whether to schedule a meeting of creditors only after prosecutors have ruled on whether a new auction should be held.

The decision came just two days after Ayoub said a new auction would be held on July 12 if creditors approved a $500 million offer from Volo do Brasil, the investment group that recently purchased Varig's cargo unit VarigLog. Creditors were scheduled to consider the bid on July 10.

Volo do Brasil was opposed to delaying the auction because it is making daily payments to keep the airline flying, the government news service Agencia Brasil reported Wednesday.

Varig is burdened by debts of $3.5 billion, much of it to Brazil's government, pension funds and the country's state-run petroleum company.

The airline is having trouble paying for landing and departure fees and fuel for its jets, and some planes are grounded amid demands by leasing companies for payment of overdue bills.

Thousands of Varig passengers have been facing delays of hours or even days as they try to use their tickets to get on flights operated by other carriers.

On June 8, the TGV group formed by Varig workers agreed to purchase the airline for $449 million at a bankruptcy auction. But the group failed to raise the cash to make the first payment, throwing the airline's fate back into doubt.


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