(From Financial Times Sep. 18, 2005)
Varig's creditors
The administrators of Varig, Brazil's troubled airline, meet the company's unhappy creditors on Monday. The mood will not be good. Administrators want creditors to convert their debts into equity in a new operating company that would be freed from some R$4.5bn of liabilities stemming from tax and pensions obligations (of total debts of R$7.7bn). But the creditors, ranging from international leasing companies to Brazilian media groups, are upset about the way their claims are being organised and, in particular, the way that one of the alleged privileged treatment afforded to one of their number, the Aerus Pension Fund.
The reorganisation plan announced last week entails 2,000 job losses at the airline and further cuts at maintenance and airport management subsidiaries. It is hoped to win creditor agreement to the reorganisation plan by the end of the month. That looks like a tall order.
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