RIO DE JANEIRO, Brazil_A Brazilian bankruptcy-court judge on Monday said he had accepted "in principle" a bid by a workers' group for embattled Varig airlines, but asked for clarification on how the group planned to finance the deal.
Judge Luiz Roberto Ayoub told a news conference he would accept the US$449 million (€353 million) bid by the TGV workers group for the right to take over the domestic and international operations of Brazil's 79-year-old flagship airline.
TGV made the lone bid at an auction Thursday, but it was well below the auction's set minimum bid of US$860 million (€675 million).
In addition, the deal was oddly structured, with TGV paying only US$124.5 million (€96 million) in cash. The rest would be paid in labor credits and debentures, a type of unsecured bond, that the company will have to issue.
Some investors have doubted whether the workers' group has the financial backing to make the airline profitable.
Ayoub said he wanted more details about the proposed debenture issue and said he will make a definitive ruling by Thursday.
But that may come too late for Varig.
The New York State Supreme Court on Friday authorized creditors to repossess seven of Varig's 72 planes.
Over the weekend the company's President Marcelo Bottini sought to reassure clients and workers, saying a hearing scheduled for Tuesday would determine who controls the planes - five MD-11s and two Boeing 777s.
Varig had to cancel 20 flights Monday, but the company denied this was because it lacked money for fuel or airport fees. The company blamed most of the cancellations on maintenance issues.
Varig, or Viacao Aerea Rio-Grandense SA, has been in financial trouble for several years, with debt of about US$3.5 billion (€2.75 billion). In June 2005, it became one of the first companies to use Brazil's new bankruptcy law, similar to U.S. Chapter 11 proceedings.
The judge said that he will schedule a meeting with creditors only after prosecutors have ruled on whether a new auction should be held.