LISBON: One of the holding companies of Portugal’s Espirito Santo banking clan filed for creditor protection in Luxembourg and the business empire’s problems also spilled over to Angola where the central bank said the local unit of Banco Espirito Santo would need more capital to deal with bad loans.
Banco Espirito Santo (BES), Portugal’s largest-listed lender, is under scrutiny from investors and regulators after disclosures of financial irregularities at Espirito Santo International, or ESI, the entity that sought creditor protection. Its problems have raised the possibility of destabilising losses at the bank. ESI, which is registered in Luxembourg, indirectly holds the largest stake in BES, at 20.1 percent. ESI said it is “currently not able to meet its debt obligations, a material portion of which have matured”. The announcement comes three days after conglomerate Rioforte, an ESI subholding, failed to repay over €1bn in debt to Portugal Telecom, forcing it to take a cut in its stake in a merger with its Brazilian rival, Grupo Oi.
ESI said in a statement that if its request for controlled management is accepted, all enforcement actions by creditors would be suspended. That should allow it to sell assets in an orderly fashion under the control of the courts, “to enable the value of these assets to be enhanced as opposed to a massive and fast sale.”
ESI sits at the top of a complex cascading ownership structure of the family empire.
Sources said earlier that Rioforte — which owns assets around the world from hotels to farms to energy and hospitals — had been preparing to file for creditor protection and it was not yet clear if a separate filing would be required. ESI owns 100 percent of Rioforte capital.
Meanwhile, investors are watching potential liabilities at BES’s 12-year-old Angolan unit as a fault line in an escalating affair that has already roiled global markets.
Banco Nacional de Angola Governor Jose de Lima Massano broke his government’s silence on the matter, saying the BESA Angolan subsidiary had problems with its credit portfolio.
“We have operations in an irregular state, so ‘bad’ credit operations,” Massano said in Thursday statements to the Angolan parliament. He did not give further details on the type or extent of the bad credit.
Massano said the problems at BESA — which is majority owned by BES and is one of the most active lenders in Africa’s second-largest oil producer — would not pose a threat to Angola’s overall financial system. “What is not at stake is either the guarantee of the deposits made with BESA, nor the responsibilities which this bank has with third parties, and much less the stability of our financial system,” Massano said.
The government of Angola, a former Portuguese colony, in December guaranteed €4.2bn, or 70 percent of the loan portfolio of BESA, which has links to the ruling elite and family of President Jose Eduardo dos Santos.
However, the guarantee lasts only until mid 2015, and some investors have expressed concern that it could be diluted by Angola’s poor credit rating. Portugal’s central bank says it is sure BESA would honour its commitments, but Luanda has not commented on the state guarantee.
Analysts say the Angolan state and state-linked companies are most likely to take a larger stake in BES Angola as BES has no capacity to subscribe to any capital increase.
Angola’s disclosure comes as Portugal’s establishment is trying to assure investors that problems with the Espirito Santo family empire — where at least two holding companies are suffering financial difficulties, imminent bankruptcy proceedings and restructurings — will not have a bearing on the southern European country’s financial stability.
Earlier on Friday, the Bank of Portugal reiterated that BES, which raised capital in May, has sufficient capital reserves to make up for any losses and added that the lender would be able to tap private investors should it need a further boost. Reuters
