Banco Espirito Santo SA’s subordinated bonds fell to a record after a parent company said it had to sell 4.99 percent of the lender to meet debt commitments.
Espirito Santo Financial Group said it reduced its stake in the Lisbon-based bank to 20.1 percent to meet a margin call on a loan taken out during the bank’s 1.04 billion-euro ($1.42 billion) rights offering in June. Banco Espirito Santo’s 7.125 percent notes due November 2023 fell 2.9 cents to 84 cents on the euro to yield 9.58 percent, according to data compiled by Bloomberg.
The sale comes as Chief Executive Officer Ricardo Salgado, the 70-year-old great-grandson of the bank’s founder was replaced by Vitor Bento after the Bank of Portugal urged the country’s second-biggest lender by market value to make changes to its executive management. Markets were roiled last week after a company within the Espirito Santo group missed payments on short-term debt, prompting Standard & Poor’s to downgrade the bank.
“A weak financial position of several group entities is compounding challenges to the bank’s franchise and poses increased risks to BES’s financial position,” S&P said in a July 11 report. “We cannot, at this point, fully capture this in our forecast of the bank’s solvency, and therefore believe that it constrains our assessment of BES’ risk position.”
Espirito Santo Financial Group borrowed more than 100 million euros from Nomura to buy shares in Banco Espirito Santo, Portuguese newspaper Expresso reported, without saying how it got the information.
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