A Luxembourg court on Friday rejected a request by two holding companies of Portugal’s Espirito Santo family for “controlled management”, a sort of bankruptcy protection from creditors.
Espirito Santo Financial Group (ESFG) and its subsidiary Espirito Santo Financiere SA still have the right to appeal, and the court has yet to decide on two other holding companies controlled by the family.
ESFG is Banco Espirito Santo’s largest shareholder, and is controlled by the bank’s founding Espirito Santo family.
Hoping to avoid a fire sale of assets, ESFG filed for creditor protection in July, before Banco Espirito Santo had to be rescued by the Portuguese state in early August due to its exposure to the debts of firms related to the family.
In the rescue, the assets and low-risk liabilities were carved out to create Novo Banco, and the old Banco Espirito Santo was left with all the debts of the family. ESFG now owns a stake of some 20 percent in the bad bank, BES.
“Due in particular to the resolution applied by the Bank of Portugal to Banco Espirito Santo … the court concluded that a restructuring of ESFG and ESFIL was impossible and that a controlled management would not benefit the creditors,” the Luxembourg-registered ESFG said in a statement.
It would not say whether it planned to appeal the decision but noted that the court was still evaluating applications for controlled management from its two major indirect shareholders, Rio Forte and Espirito Santo International, whose assets include many of the family’s holdings in real estate, hotels and plantations from Portugal to Africa and Latin America.
Novo Banco has made a claim on ESFG’s insurance company, Tranquilidade, which was pledged as security for the family’s commitments to the bank.
Novo Banco has already agreed to sell the insurer to U.S. fund Apollo Global Management, although the sale faces opposition from some bondholders.
The situation with ESFG’s other assets also looks glum amid a series of international regulatory actions. Dubai’s financial regulator is seeking court approval to wind up the local arm of ESFG, and Switzerland’s financial regulator has opened bankruptcy proceedings against Banque Privee Espirito Santo.-Reuters
