Brazil’s Varig to be auctioned in July for a minimum US$860 million

10 May 2006

Rio de Janeiro, Brazil, 10 May – Brazilian state airline Varig will be offered up for sale at auction for a minimum price of US$860 million, within the next 60 days, the company said Tuesday.

The decision was taken during a Varig creditors meeting, which took place in Rio de Janeiro, on approval of a proposal negotiated between consulting company Alvarez & Marsal and the company’s workers.

Interested parties may present proposals to acquire the “new” Varig, without its debts, which are estimated at US$3.4 billion and which will remain at the “old” company.

In this case, the minimum price would be US$860 million the company said in a statement.

If this figure is not reached, interested parties may present acquisition proposals for Varig’s operations in Brazil for a minimum of US$700 million.

In this situation the company’s debts would remain in the hands of Varig’s foreign operations, and part of the profits of the auction would be used to pay of part of the debts.

Brazil’s aviation sector regulator (ANAC), said that at least 27 Brazilian companies could take part in Varig’s auction.

Foreign companies may also take part in consortia to participate in the auction as long as they have only up to a 20 percent stake, which is the maximum allowed under Brazilian law.

The vacuum left by Varig has been positive for its direct competitors, especially TAM and Gol, whose market shares increased to 44.3 percent and 33.4 percent, respectively, in April. (macauhub)

MACAUHUB FRENCH