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, a Rio de Janeiro court said.
Judge Luiz Roberto Ayoub approved the US$449 million (€353 million) bid made at a June 8 auction by Varig workers group TGV, the court that he presides said in a statement. The bid was well below the auction's set minimum of US$860 million (€675 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, the statement said, without naming the investors.
TGV now has 72 hours to make an initial deposit of US$75 million (€59.57 million), the statement said. If the payment is not made the auction will be declared null and void, it 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 (US$3.5 billion; €2.75 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 Corporation, 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.
The bankruptcy court judge asked for clarification on how the group planned to finance the deal.
The judge said that he will schedule a meeting with creditors only after prosecutors have ruled on whether a new auction should be held.