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Sovereign Wealth Fund Takes Legal Action Against Banco de Portugal Over Costly Debt Transfer

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Adrian Orr, CEO of the New Zealand Superannuation Fund

Adrian Orr, CEO of the New Zealand Superannuation Fund

On July 3, 2014, New Zealand Superannuation Fund (NZSF) invested US$ 150 million in notes issued by Oak Finance Luxembourg SA. The vehicle Oak Finance was arranged by Goldman Sachs as an independent entity to assist in the financing of trade transactions being made by Lisbon-based Banco Espírito Santo. For example, one trade deal was Banco Espírito Santo’s backing of a financing agreement between Venezuela’s state-owned oil firm Petróleos de Venezuela SA and China-based Wison Engineering Services Co. Banco Espírito Santo provided letters of credit to Petróleos de Venezuela SA with regard to an oil refinery project in Puerto la Cruz.

Oak Finance lent US$ 784.6 million to Banco Espírito Santo in the form of senior debt. Bad news in the press trickled out regarding allegations of fraud, money-laundering and document falsification at Banco Espírito Santo. On August 3, 2014, Banco Espírito Santo failed and the Oak Finance loans, along with other senior loans, were moved to a successor bank Novo Banco. Here is where it gets interesting.

Losing Out

On December 22, 2014, Banco de Portugal, Portugal’s central bank, moved the loan back to Banco Espírito Santo – essentially an entity where the sovereign wealth fund has virtually no shot of being repaid. A law brought on August 1, 2014, made it so any shareholder that owns more than 2% of the insolvent bank would be prohibited from transferring liabilities to the new bank. Banco de Portugal moved the loans back because it saw Oak Finance as a vehicle for Goldman Sachs, the loan arranger. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

SWFI First Read, January 16, 2018

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BP Plans to Take $1.7 Billion Charge to End Legal Claims on Deepwater Horizon

BP Plc is planning to take a US$ 1.7 billion charge to end legal claims regarding the disastrous 2010 Deepwater Horizon spill in the Gulf of Mexico.

Ethereum Co-Founder Leaves Fenbushi Capital

Vitalik Buterin, a co-founder of Ethereum, which is a cryptocurrency, exited China-based Fenbushi Capital. Fenbushi Capital was formed in 2015. Buterin is retaining his role as an advisor of Fenbushi Capital. Buterin dropped out of the University of Waterloo in 2014 when he got a Thiel Fellowship. This permitted him to work on Ethereum full time.

Kingdom Holding Sells Four Seasons Beirut Hotel Stake

Saudi Arabia’s Kingdom Holding sold its position in the Four Seasons Hotel in Beirut for roughly US$ 100 million. Blominvest, a unit of Blom Bank, advised on the transaction. The Four Seasons will continue to manage the property.

Mercer Signs Deal to Buy BFC

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Deutsche Bundesbank to Slowly Add Renminbi into Foreign Reserve Mix

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Deutsche Bundesbank’s executive board made a decision to invest in Chinese renminbi in the summer of 2017 as part of its foreign currency reserves. The German central bank on January 15, 2018, confirmed it will start investing in Chinese renminbi and also consider investing in additional foreign currencies. The move mimics the European Central Bank (ECB), which already considers the Chinese renminbi as a reserve currency. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Bpifrance, CDB and Cathay Capital Launch Third Cross Border Fund

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Bpifrance, China Development Bank Capital Co., Ltd. (CDB Capital) and Cathay Capital agreed to launch Sino French Midcap Fund II. This is the second fund the group is launching after the €500 million Sino French Midcap Fund I from June 27, 2014. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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