Portugal’s central bank stepped up efforts to clean up the troubled lender Banco Espírito Santo and end its family control after the bank reported a stunning first-half loss of $4.8 billion that will force it to raise more capital, the International New York Times reported. After the bank’s earnings report, the central bank issued a statement ordering Banco Espírito Santo to raise more funds and announced the suspension of three members of the Espírito Santo family, which has controlled the bank for generations. The central bank removed the three members’ voting rights as directors and said that it would push for legal action against any director involved in fraudulent activities. “The reshuffle of the leadership equals a nationalization of the financial institution through the back door,” Antonio Barroso, an analyst at Teneo Intelligence in London, said in a report. Auditing responsibilities will be handed over to PricewaterhouseCoopers, the central bank said, until shareholders appoint a new auditing committee for the bank. The central bank also faulted KPMG, the auditing firm long used by the Espírito Santo group, for leading it to wrongly assert on July 11 that Banco Espírito Santo had enough capital to withstand possible lending losses. The central bank said that it then was informed about other facts, “only identified by the external auditor,” it said, “with a negative impact of around €1.5 billion.” Read more. (Subscription required.)
Daily Insolvency News Headlines
Fri., August 1, 2014
Argentina’s debt saga has been dragging on for more than 12 years and, with the country slipping back into default on Wednesday, it is far from over. Hopes remain that a deal with the private sector can still be reached, the Financial Times reported. A last-minute proposal by a group of Argentine banks collapsed behind the scenes shortly after economy minister Axel Kicillof announced that the “vulture funds” had rejected the government’s offer. But other proposals are in the works, according to local media. “This isn’t over yet,” said Daniel Kerner, an analyst at Eurasia Group in New York. He argues that a settlement involving local banks remains the most likely outcome, with further meetings expected to take place in New York on Thursday. A deal would involve a consortium of banks buying the defaulted bonds of the holdout creditors, who rejected debt restructurings following Argentina’s previous default in 2001 but won the right to be paid in full in a 2012 US court ruling. Payment of the holdouts – mainly US hedge funds – would enable Argentina to continue paying the rest of its bondholders, after it failed to meet a deadline to pay bondholders on July 30 after its payments were blocked by US judge Thomas Griesa. Read more. (Subscription required.)
Britain’s Serious Fraud Office said on Thursday that it had reached a second settlement in a series of civil claims brought by two brothers after a flawed investigation into the collapse of the Icelandic bank Kaupthing during the financial crisis, the International New York Times DealBook blog reported. The office, which prosecutes fraud and corruption cases, dropped the brothers, Vincent and Robert Tchenguiz, as suspects in 2012 after it admitted that the way it had handled some seized materials in the case “was flawed and thus unlawful.” The office was criticized by the High Court of Justice for the way it handled the case. On Thursday, the fraud office said it would pay 1.5 million pounds, or about $2.5 million, to settle claims by Robert Tchenguiz and his company, R20. The agreement comes less than a week after the fraud office agreed to pay £3 million to settle civil claims brought by Vincent Tchenguiz. In legal proceedings against the fraud office, the brothers had sought as much as £300 million in damages. Read more. (Subscription required.)
Zodiac Pool Solutions SAS, the Paris-based swimming pool and spa manufacturer, filed Thursday for bankruptcy protection in the U.S. as part of its debt-restructuring effort now under way in the U.K., The Wall Street Journal reported. Formerly known as Zodiac Marine & Pool, Zodiac Pool filed for protection under Chapter 15—the section of the Bankruptcy Code that deals with international insolvencies—in U.S. Bankruptcy Court in Wilmington, Del. In 2007, Washington-based private-equity firm Carlyle Group CG -3.83% LP bought Zodiac and then merged its WaterPik business into the company. Carlyle later split off Zodiac's aerospace division form the pool maker. The company, which has more than $1.3 billion in debt, ran into financial trouble in 2008 and has been closing facilities and selling assets, including it WaterPik and boat businesses, to stay afloat. But those efforts haven't been enough to refinance a big chunk of debt coming due in the next 14 months. Zodiac is seeking to extend the maturity of some of that debt to 2019 through a restructuring that is being conducted through a U.K. process called a "scheme of arrangement," which is somewhat akin to Chapter 11 reorganization in the U.S. Read more. (Subscription required.)
Compensation payments totalling €10 million have been paid to more than 3,100 depositors of Berehaven Credit Union, the Central Bank has said. The credit union in Cork closed its doors last week and a liquidator was appointed following High Court orders issued on behalf of the Central Bank, the Irish Times reported. Cheques have now been posted to over 85 per cent of the credit union’s members. The bank said remaining deposits are being progressed “as quickly as possible” and it is expected that further payments will be made shortly. It is advising depositors that they do not need to make any application to the scheme for repayment as this will be processed automatically. Last week, the bank secured orders winding up the credit union. Insolvency practitioners Jim Hamilton and David O’Connor of BDO Ireland were appointed as provisional liquidators of the credit union in Castletownbere. The closure affects more than 50 per cent of the 6,000 strong population of the Beara Peninsula, 3,500 of whom were members of the credit union. Read more.
The original Mastertronic actually disappeared in the mid-90s, but it was reborn in 2004 when one of its co-founders, Frank Herman, helped negotiate the purchase of the name from Sega. Sadly, the UK-based games publisher, now known as the Mastertronic Group, is once again facing a bleak future, as it has announced plans to close its headquarters, lay off 40 percent of its staff and completely exit the business of publishing physical copies of games, PC Gamer reported. Mastertronic Managing Director Andy Payne revealed the news in a lengthy blog post on Develop, in which he acknowledged that the company has been suffering cash flow problems that came to a head when one of its creditors demanded repayment in full on a loan from 2013. Unfortunately, Mastertronic could not meet that demand. "We were threatened with the issue of a Winding Up Order, something that is very, very serious and something we needed to protect ourselves against," Payne wrote. "We got a little extension in return for a payment against the loan, but we faced being officially wound up on Monday 21st of July at 9 am, unless we met the debt in full." Read more.