Faces Dissolution As Buyout Fails

Varig, Brazil's once stately flagship carrier, faces dissolution Wednesday... after creditors rejected an offer to buy the troubled airline for a half-billion dollars.

That decision Monday night led to a near-panic on the Brazilian stock market Tuesday -- as Varig investors rushed to dump their shares. The activity was so intense that the exchange suspended trading.

Those shares will now be sold at auction... with the opening bid 50-percent lower than at the close on Monday.

The only buy-out offer was tendered by Variglog, which was once the cargo wing of the troubled airline before it was sold off earlier this year.

But what killed the deal? While the Associated Press reports employees -- both current and retired -- favored the buyout... it was opposed by aicraft leasing companies.

Varig was once the prince of the Brazilian skies, and the country's biggest airline. Today... it has just 13 planes. Much of the fleet is grounded... it's unable to pay for fuel and landing fees... and those leasing companies now want their aircraft back.

Varig assets are set to go on the block Wednesday.

FMI: www.varig.com