TAP Portugal and debt-ridden Brazilian airline Varig have signed a memorandum of understanding to help resolve Varig's financial problems, a source close to the deal said on Monday.

The source did not elaborate, but said a statement would likely come from the companies later on Monday.

Portuguese daily Publico reported on Monday that TAP Chief Executive Fernando Pinto said that under the deal TAP would help manage Varig.

TAP has three weeks to conclude the first phase of the agreement, which was signed in Brazil on Saturday, the newspaper said.

Pinto said that TAP ultimately wants to acquire 20 percent of Varig's capital, the maximum allowed under Brazilian law, Publico reported.

However, Pinto said in a letter to workers earlier this month that the privately held airline had not proposed a merger.