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Varig creditors approve Brazilian reorganization plan
By Caroline Salls
Pittsburgh, July 28 - Varig SA's creditors voted to approve the company's restated reorganization plan under its judicial recovery proceedings pending in the Eighth Commercial Bankruptcy and Reorganization Court in Rio de Janeiro, Brazil, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.
The plan is based on a bid by Varig Logistica SA to purchase one of the company's production units, according to court documents.
The assets to be acquired include Varig's regular national and international air carriage operations, including its Airline Authorization Certifications.
Under the bid, Varig Logistica would fund a R$50 million ten-year non-transferrable debenture, to be distributed to creditors under the plan.
The debenture will have a R$4.2 million fixed yearly remuneration to be paid on a monthly basis, and it will be convertible into an interest of up to 5% of the total voting capital of the company.
At the bidder's discretion, issuance of the debenture can be replaced by a R$41.48 million cash payment.
Under the plan, a special purpose corporation will be formed, which will remain liable for the company's tax obligations and will operate Varig's facilities.
The corporation will issue 16 different series of debentures under the plan equal to its debt amount. The debentures will mature on July 17, 2026.
In addition, the company will attempt to sell its assets, with the proceeds to be used to repay some of the debentures.
Varig, a Rio de Janeiro, Brazil-based air carrier, filed for Section 304 bankruptcy on June 20, 2005. Its case number is 05-14400.
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