Varig requests permanent injunction to allow asset sale under Brazilian plan

By Caroline Salls

Pittsburgh, Feb. 7 - Varig SA's foreign representative Eduardo Zerwes requested court approval of a permanent injunction that will allow for the sale of substantially all company assets under its in-court Brazilian reorganization plan, according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

According to the motion, the permanent injunction is necessary to give effect to the Brazilian plan and asset sale.

The company has been granted several preliminary injunction extensions in its Section 304 bankruptcy case amid objections from aircraft lessors who said the company has failed to pay rent and maintenance fees on the aircraft, with the latest preliminary injunction set to expire on March 19.

Varig said it has reorganized successfully in Brazil, and all claims, including claims of United States creditors, against them will be resolved in the foreign proceedings under the reorganization plan.

Throughout these proceedings, Varig said the U.S. bankruptcy court has supported its reorganization by deferring substantive reorganization issues to the jurisdiction of the Brazilian court, and the permanent injunction would merely further those goals by aiding implementation of the plan and the sale in the United States and abroad.

The company said the proposed permanent injunction will enjoin the enforcement of any pre-bankruptcy claims against Varig and claims arising after bankruptcy filing held by creditors that elect to adhere to the plan.

The injunction will also permanently stay all proceedings in connection with these claims, subject only to the right of creditors to receive distributions in accordance with the plan.

A hearing is scheduled for March 16.

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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