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TAP Brings Half a Billion Dollars to Save Brazil's Ailing Varig Airlines |
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Written by Newsroom
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Wednesday, 09 November 2005 |
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Fernando Pinto, president of the Portuguese airline, TAP, reiterated Tuesday, November 8, his company's intention to invest US$ 500 million on the reorganization of Varig.
He said that part of the funds would come from investors who are TAP's business partners in Europe and the rest would come from the company itself.
Pinto and the president of the National Economic and Social Development Bank (BNDES), Guido Mantega, signed a loan contract for US$ 42 million, two-thirds of the total amount (US$ 62 million) to be invested in the first phase of the recovery of the Brazilian airline.
TAP used the BNDES loan to buy 95% of the shares of the VarigLog cargo transport company and 90% of the shares of Varig Engineering and Maintenance (VEM).
Varig will use the money to repay a debt to US firms from which it leased 40 airplanes. The airplanes were to be seized under a US court order, if the debt were not repaid by Wednesday, November 9.
"With this operation, Varig obtains breathing room for the coming phases. Besides these short-term resources, TAP will cover US$ 40 million in receivables, so that Varig can pay off part of what it owes its employees, as well as putting planes back into the air to generate revenues," Pinto added.
Varig has approximately 11,500 employees and a fleet of 78 aircraft, of which 15 are out of service. The company's overall debt to government and private creditors stands at around US$ 3.18 billion (R$ 7 billion).
Agência Brasil
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