One of the holding companies of Portugal’s Espirito Santo banking business group filed for creditor protection in Luxembourg on Friday and the group’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 (ESI), the company that sought creditor protection.
Its problems have raised the possibility of destabilizing 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 1 billion euros (US$1.35 billion) 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,” the statement said.
ESI is at the top of the ownership structure of the family-run empire.
Sources told reporters earlier this week that Rioforte — which owns assets around the world such as hotels, farms, 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 for potential liabilities at BES’ 12-year-old Angolan unit, in an escalating affair that has already rocked global markets.
Banco Nacional de Angola Governor Jose de Lima Massano broke his government’s silence on the matter, saying that Banco Espirito Santo Angola (BESA) had problems with its credit portfolio.
“We have operations in an irregular state, so ‘bad’ credit operations,” Massano said on Thursday in a statement to the Angolan parliament, which was e-mailed to reporters on Friday. He did not give further details of the type or extent of bad credit.
Massano said the problems at BESA — which is majority owned by BES and is one of the most active lenders in Angola — would not pose a threat to the country’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 4.2 billion euros, or 70 percent of the loan portfolio of BESA, which has links to the ruling elite and family of Angolan President Jose Eduardo dos Santos.
However, the guarantee lasts only until the middle of next year, and some investors have expressed concern that it could be diluted by Angola’s poor credit rating.
Portugal’s central bank said it was sure BESA would honor 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 BESA, as BES does not have the capacity to subscribe to any capital increase.
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