Varig preliminary injunction extended again; now ends May 31

By Caroline Salls

Pittsburgh, April 28 - Varig SA's embargo on the seizure of its aircraft was extended until May 31 by the U.S. Bankruptcy Court for the Southern District of New York via a bridge extension to the company's preliminary injunction.

According to a company news release, the extension allows the company to continue its financial recovery plan.

"The judge's findings are consistent with those of the Brazilian judge, Roberto Ayoub, overseeing Varig's recovery plan, both of whom have faith that the company is on the road to financial stability," president Marcelo Bottini said in the release.

The bridge extension came after a hearing was held Thursday to consider converting the preliminary injunction to a permanent one.

That request drew several objections, and on Monday aircraft lessor International Lease Finance Corp. asked the court to find the company in contempt of a previous order to keep current on all aircraft rent and maintenance payments.

According to the motion, on Sept. 20 the court ordered the company to stay current on the aircraft payments, but the company has failed to pay more than $2 million in rent on some of its aircraft, has failed to maintain the aircraft and has failed to return one aircraft after the lease ended and other aircraft after lease agreement defaults.

Varig's preliminary injunction has been extended several times throughout its Section 304 bankruptcy case, amid objections from International Lease and other lessors who said the company has failed to pay rent and maintenance fees on the aircraft.

As previously reported, 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, 2005. Its case number is 05-14400.

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