LISBON—The "bad bank" left by the collapse of Banco Espí rito
Santo SA Friday reported negative equity of €2.42 billion ($2.64
billion) as of August last year, a strong indicator that most
investors will suffer big losses on investments related to the
bank.
Banco Espí rito Santo collapsed in August last year after
reporting big half-year losses over its exposure to troubled parent
Espirito Santo International SA and related entities, which have
since become insolvent.
The country's central bank broke the bank into a "good bank,"
named Novo Banco SA, and a "bad" one. Novo Banco (which means "New
Bank") kept the bulk of BES's branches, deposits and loans, while
the bad bank kept shareholders' and junior bondholders' claims on
the bank and its problematic subsidiaries in the U.S., Libya and
Angola.
On Friday, the "bad bank," which retained the name Banco Espí
rito Santo, reported total liabilities of €2.61 billion and total
assets of €193.4 million as of August 2014. Among the liabilities
are €668 million the bank set aside before it was broken up to
cover losses from retail clients who had bought the debt of
Espirito Santo International and entities through bank branches.
The bank, however, said it can only release that money if ordered
by a court.
Retail clients, whose investments are now close to worthless,
have been protesting almost weekly, urging to be paid back and
alleging the products were missold by the bank. Also listed among
the liabilities is a â,¬587 million loan arranged by Goldman Sachs
Group Inc. through a finance vehicle called Oak Finance Luxembourg
SA.
Although the loan was originally transferred to Novo Banco, the
Bank of Portugal decided later that it belonged to the bad bank
instead.
The decision means Goldman Sachs and its clients could lose
hundreds of millions of dollars from investments in Oak Finance
notes backed by the loan. Goldman and investors have filed lawsuits
against the Bank of Portugal decision in London courts.
Novo Banco, meanwhile, is up for sale, with another round of
bids due later Friday. Three companies presented bids in the
previous round—U. S. private-equity firm Apollo Global Management
LLC, China's Fosun International Ltd. and Anbang
Insurance—according to people familiar with the situation.
Although Novo Banco wants to fully pay back the €4.9 billion
capital injection it received from a bailout fund in August last
year, analysts consider it unlikely the bank will fetch that
much.
Write to Patricia Kowsmann at patricia.kowsmann@wsj.com
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