After Banco Espirito Santo’s €4.9bn rescue, the central bank moved the lender’s deposit-taking operations and most of its assets to Novo Banco Junior creditors stayed with the old bank, which is getting no state money, until it can be shut down.
Bloomberg
Lisbon
Goldman Sachs Group said yesterday it may challenge the Bank of Portugal’s decision not to transfer Banco Espirito Santo’s debt to a special-purpose vehicle to Novo Banco, the bank that emerged from the breakup of Lisbon-based Banco Espirito Santo.
Oak Finance Luxembourg was set up by New York-based Goldman Sachs to raise funds for Banco Espirito Santo in July, said Fiona Laffan, a spokeswoman for Goldman Sachs in London. The Bank of Portugal’s Resolution Fund bailed out the bank on August 3.
“On August 11, 2014, a senior representative of the Bank of Portugal explicitly confirmed to us in writing the transfer of these obligations,” Laffan wrote in an e-mailed statement. “In addition, Novo Banco also confirmed in writing that Oak Finance had been transferred as one of its liabilities.”
Novo Banco said in a December 23 regulatory filing that the Bank of Portugal had decided not to transfer the Oak Finance liability to Novo Banco, adding that this decision boosted Novo Banco’s reserves by €548.3mn ($668mn).
After Banco Espirito Santo’s €4.9bn rescue, the central bank moved the lender’s deposit-taking operations and most of its assets to Novo Banco Junior creditors stayed with the old bank, which is getting no state money, until it can be shut down.
“The Bank of Portugal’s unexpected public announcement earlier this week to retroactively return these obligations contravenes market expectations and damages multiple investors, including pension funds, who were offered these investments in reliance on these prior representations,” Laffan said.
“Absent the Central Bank’s reconsidering its position in light of the damage it will be causing to our clients and financial markets, we plan on pursuing all appropriate remedies.”
Spokesmen at the Bank of Portugal and Novo Banco didn’t respond to calls seeking comment.