Portugal’s government and central bank assured investors on Friday that the southern European country’s financial system was sound, aiming to quell worry about the spillover effects of trouble at the Espirito Santo business empire.
“It is important that Portuguese and foreign investors... remain calm about the bank and our financial and banking system,” Portuguese Prime Minister Pedro Passos Coelho told reporters in Lisbon.
Recent disclosures of financial irregularities at a web of family-held holding companies behind Portugal’s largest listed bank, Banco Espirito Santo (BES), have raised questions about potentially destabilizing losses at the bank and other companies in the family’s orbit.
In a statement late on Thursday night, BES said that any losses relating to the bank’s 1.15 billion euro (US$1.56 billion) exposure to Espirito Santo holdings would not put it at risk. The bank said it had 2.1 billion euros in capital above minimum regulatory requirements as of March 31, taking into account a further 1 billion raised via a share sale last month.
The statement partially steadied market jitters on Friday in Portugal and beyond. European markets edged higher and Italy paid record low yields at an auction, shrugging off fears that had weighed on the sovereign debt markets earlier in the week.
Portugal’s PSI benchmark closed up 0.6 percent. BES shares opened up 11 percent when trading resumed after a suspension, though the stock then seesawed, closing down 5.5 percent, despite a ban on short selling in the stock.
Portugal’s CMVM market regulator said on Friday it had extended this “shorting” ban on BES shares for two more days.
Moody’s Investors Service said it had cut the long-term debt ratings of BES to “B3” from “Ba3” and the long-term deposit ratings to “B2” from “Ba3,” and it was on review for downgrade.
The ratings agency said the downgrade “reflects Moody’s concerns regarding BES’ creditworthiness that are heightened by the lack of transparency on the ring-fencing of BES against any troubles emerging from its holding company Espirito Santo Financial Group [ESFG] or any other group entity.”
BES’ junior debt recovered much of Thursday’s losses and its senior unsecured bonds fared even better, trading up 5 basis points after falling 2 basis points on Thursday.
Market unease lingers because questions remain unanswered around the bank’s relationship with Espirito Santo companies.
An audit found a “serious financial condition” at Espirito Santo International SA — a vast conglomerate with holdings in banks, hotels and healthcare which is near the top of the family business pyramid. ESFG later said ESI had overvalued its assets and failed to recognize losses and debts, but the reasons it got into such a financial mess are unclear. Investors are also in the dark about the size of any potential losses.
While BES gave the most detailed breakdown yet of its exposure to other Espirito Santo group companies, the bank said it could not assess the potential losses until a restructuring had taken place at its largest shareholder ESFG, and at other family holdings under the ESI umbrella.
That restructuring plan is not finished yet, but could be announced as early as next week, according to a person with knowledge of the operation. It is likely to include swapping some of the debt issued by ESI and Rio Forte into equity in those companies, as well as pushing out repayment dates on other debt. Some non-financial assets, including the Tivoli hotel chain in Portugal and Brazil, could also be sold.
Quanta Computer Inc (廣達) chairman Barry Lam (林百里) is expected to share his views about the artificial intelligence (AI) industry’s prospects during his speech at the company’s 37th anniversary ceremony, as AI servers have become a new growth engine for the equipment manufacturing service provider. Lam’s speech is much anticipated, as Quanta has risen as one of the world’s major AI server suppliers. The company reported a 30 percent year-on-year growth in consolidated revenue to NT$1.41 trillion (US$43.35 billion) last year, thanks to fast-growing demand for servers, especially those with AI capabilities. The company told investors in November last year that
Intel Corp has named Tasha Chuang (莊蓓瑜) to lead Intel Taiwan in a bid to reinforce relations between the company and its Taiwanese partners. The appointment of Chuang as general manager for Intel Taiwan takes effect on Thursday, the firm said in a statement yesterday. Chuang is to lead her team in Taiwan to pursue product development and sales growth in an effort to reinforce the company’s ties with its partners and clients, Intel said. Chuang was previously in charge of managing Intel’s ties with leading Taiwanese PC brand Asustek Computer Inc (華碩), which included helping Asustek strengthen its global businesses, the company
Taiwanese suppliers to Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電) are expected to follow the contract chipmaker’s step to invest in the US, but their relocation may be seven to eight years away, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. When asked by opposition Chinese Nationalist Party (KMT) Legislator Niu Hsu-ting (牛煦庭) in the legislature about growing concerns that TSMC’s huge investments in the US will prompt its suppliers to follow suit, Kuo said based on the chipmaker’s current limited production volume, it is unlikely to lead its supply chain to go there for now. “Unless TSMC completes its planned six
Power supply and electronic components maker Delta Electronics Inc (台達電) yesterday said it plans to ship its new 1 megawatt charging systems for electric trucks and buses in the first half of next year at the earliest. The new charging piles, which deliver up to 1 megawatt of charging power, are designed for heavy-duty electric vehicles, and support a maximum current of 1,500 amperes and output of 1,250 volts, Delta said in a news release. “If everything goes smoothly, we could begin shipping those new charging systems as early as in the first half of next year,” a company official said. The new
RSS