An eleventh-hour rescue for Varig, Brazil’s flag-carrying airline, inched closer on Monday when a prospective buyer made a short-term bridge-loan to cover one day’s operational expenses.

Varig’s shares gained 58 per cent in São Paulo on the news. The airline has come close to collapse in recent weeks after its auction on June 8 failed to find a buyer. It has been under creditor protection for the past year with debts of at least R$8bn.

The deposit was made by VarigLog, the airline’s former cargo transport subsidiary sold six months ago to a consortium backed by Matlin Patterson, a US distressed equity firm.

On Sunday, VarigLog offered to inject $485m into Varig in return for 90 per cent of its shares. Under the offer, the remaining shares would be split between Varig’s employees and its other creditors. It also offered to make a short-term loan of $20m to keep Varig flying until a new auction is called but declined on Monday to say how much money had actually been handed over.

Tens of thousands of passengers have faced long delays in Brazil and overseas in the past several days as Varig has cancelled an increasing proportion of its flights due to lack of operating cash flow. It has reportedly accumulated debts of R$1.2m with other Brazilian operators over the past ten days as its competitors have stepped in to carry stranded passengers.

The judge in charge of Varig’s creditor protection programme must decide in the next few days whether to submit VarigLog’s offer for creditor approval, open a new auction, or declare Varig bankrupt.

The offer is being challenged by other airlines who say VarigLog’s ownership structure breaches a limit of 20 per cent on foreign ownership of aviation companies.

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