Bloomberg News

Espirito Santo International Asks for Protection From Creditors

July 18, 2014

GRAPHIC: Structure of the Espirito Santo Group

Graphic courtesy BofA Merrill Lynch Global Research

Espirito Santo International SA, which roiled global markets this month after it missed some payments on commercial paper, asked for protection from creditors under Luxembourg law.

“ESI currently isn’t able to meet its obligations, due to the maturity of a significant part of its debt,” the company said last night in an e-mailed statement. It provided no numbers on its debt.

Espirito Santo International is at the top of a chain of holding companies tied to the biggest stake in Portugal’s Banco Espirito Santo SA. The bank said in May that accounting irregularities had been found at ESI, which had an “extremely negative financial situation.” The lender last night said it hired London-based law firm Linklaters LLP to defend its interests in the procedure sought by ESI.

“The controlled management regime will allow the company to defend the interests of its creditors in a transparent and orderly way under the control of the courts and nominated officials,” Espirito Santo International said. That will allow “a process of managing the value of the assets for creditors that is more adequate than a rapid and massive liquidation,” it said.

Approval of the company’s request would suspend all judicial actions by creditors except some valid financial guarantee agreements, Espirito Santo International said in the statement. The suspension allows for the implementation of an asset management and liquidation plan under a court’s control, it said.

Rioforte Investments SA, another holding company that’s part of the same group, failed on July 15 to repay 847 million euros ($1.1 billion) of commercial paper to Portugal Telecom SGPS SA. Luxembourg-based Rioforte plans to file for creditor protection, a person familiar with the matter said this week.

Linked Companies

Espirito Santo International fully owns Rioforte, which owns 100 percent of Espirito Santo Irmaos SGPS SA. That company owns 49 percent of Espirito Santo Financial Group SA, the holder of 20 percent of Banco Espirito Santo.

Moody’s Investors Service cut Espirito Santo Financial Group’s rating July 17 for the second time this month, to Ca, reflecting what it called the heightened risk of default combined with “significant” losses for bondholders.

Banco Espirito Santo on July 10 said it has exposure of 1.18 billion euros to companies of Grupo Espirito Santo through loans, securities and other items, and is waiting for the release of that group’s restructuring plan to assess any potential losses. The lender also said it has a capital buffer of 2.1 billion euros above the regulatory minimum following a June capital increase.

Grupo Espirito Santo includes the non-financial businesses of the Espirito Santo family, descendants of the bank’s founder.

To contact the reporters on this story: Anabela Reis in Lisbon at areis1@bloomberg.net; Joao Lima in Lisbon at jlima1@bloomberg.net

To contact the editors responsible for this story: Jerrold Colten at jcolten@bloomberg.net; Vidya Root at vroot@bloomberg.net Jim Silver, Jeran Wittenstein


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