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