Varig preliminary injunction extended to Dec. 22

By Caroline Salls

Pittsburgh, Nov. 10 - Varig, SA's preliminary injunction in its Section 304 bankruptcy case was extended to Dec. 22, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, Varig asked for a brief continuation of the injunction to enable it to obtain a financial proposal from the Brazilian national development bank (BNDES), which would enable it to obtain immediate access to $62 million.

Varig is proposing to use that money to partially satisfy the more than $70 million in post-bankruptcy lease payment arrearages already owed to aircraft lessors.

The extension drew several objections last week from lessors including Ansett Worldwide Aviation, USA, Air Leasing Ltd. and Central Air Leasing Ltd., who argued that the company has not been making payments on its aircraft leases, despite warnings from the court.

The injunction prohibits a lawsuit, action, enforcement process or proceeding, or claim or demand of reclamation for any leased aircraft and keeps creditors, employees and utility providers from terminating contracts for goods and services that would "threaten the contemplated restructuring."

Varig, a Rio de Janeiro, Brazil-based air carrier, filed for Section 304 bankruptcy on June 20. Its case number is 05-14400.

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