German creditors challenge sale of BES insurance arm
A group of German creditors is attempting to block the planned sale of a Portuguese insurance company in a move that could disrupt the disposal of assets belonging to the collapsed Espírito Santo business empire.
The bid to stop the sale of the insurer Tranquilidade to Apollo Global Management, a US private equity fund manager, in a deal worth about €200m could mark the beginning of other legal challenges to attempted disposals by the failed business group.
When Banco Espírito Santo was split into “good” and “bad” banks this month as part of a €4.9bn bailout, Tranquilidade came under the ownership of Novo Banco, the “good” bank.
Apollo has since been in exclusive talks with Novo Banco to acquire Tranquilidade in a deal that is expected to be finalised shortly. But the group of about 10 German creditors say such a disposal would be illegal and would “seriously damage their legitimate interests”.
The group are creditors of Espírito Santo Financial Group (Portugal) (ESFP), which indirectly owns 45 per cent of Tranquilidade. Together the creditors hold 12 per cent of a €70 million euro bond issued by ESFP, which is due to be redeemed in May 2016.
ESFP, part of a complex structure of holding companies that makes up the Espírito Santo business empire, is in receivership under the supervision of a Lisbon court.
Lawyers representing the German creditors have written to Novo Banco saying they will take legal action to annul the transaction if the planned sale to Apollo goes ahead.
“We are confident the sale can be easily stopped if we take legal action,” Rainer Manthey, one of the German bondholders said.
Novo Banco said talks on the planned sale of Tranquilidade were continuing, but made no comment on any potential legal challenge.
Before BES was bailed out, the Bank of Portugal determined that Tranquilidade shares should be pledged to BES as a guarantee that Espírito Santo Financial Group (ESFG) would repay group debt that it had sold to BES’s retail clients.
The German creditors say they “strongly disagree with the legal validity of the pledge”.
ESFG, which is under creditor protection in Luxembourg, owns 100 per cent of ESFP and the other 55 per cent of Tranquilidade, giving it in effect ownership of 100 per cent of the insurer.
Officials familiar with the aftermath of the BES bailout say other creditors of Espírito Santo companies are also likely to challenge attempts to dispose of the group’s assets.