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Last Updated: Tuesday, 20 June 2006, 05:00 GMT 06:00 UK
Brazil court backing Varig deal
Varig plane
Planes could be grounded if Varig goes into administration
A bankruptcy court judge has given a workers' group 72 hours to pay a deposit to buy Brazilian airline Varig.

The consortium of employees and foreign investors must find $75m (40.1m) by Friday or the debt-ridden company could go back on the market.

It has agreed to pay $449m for the beleaguered firm, well below the $860m minimum asking price.

The judge gave the sale the go-ahead after studying the employees' proposal of how they would finance the deal.

It plans to issue debentures which the group said could be exchanged for cash.

"The consortium has presented the explanations and the guarantees necessary and the court is satisfied," Judge Robert Ayoub said.

Administration threat

The NV Participacoes consortium would seek a bridging loan if it couldn't raise the deposit, said president of the Varig workers' group, Marcio Marcillac.

He criticised the judge for not immediately handing management over to the workers.

If the bid collapses, Varig could go into administration.

The struggling carrier's domestic and international assets, including 52 aircraft, are at stake.

But the new owner would not have to assume any of the airline's estimated $3.5bn debt.

Varig has been under bankruptcy protection for a year.

It was the top airline in Brazil until 2004, but was then overtaken by TAM and later by Gol.

The airline has suffered financial problems for years because of rising costs and growing low-cost competition.

It now has just 16.7% of the domestic market, but remains the leading Brazilian carrier internationally, with a 66.4% share.

Since 1945, Varig has been majority-owned by the non-profit Ruben Berta Foundation.

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