Headlines

Banco Espirito Santo (BES) could be sued over a loan that one of its founding family's holding companies failed to repay to Portugal Telecom, sources said on Thursday, as credit rating agencies downgraded the bank and its key shareholder. Still, Finance Minister Maria Luis Albuquerque said the problems faced by BES, Portugal's largest listed bank, and the family's Espirito Santo Group did not pose an imminent danger to the country's financial system and reiterated the government did not plan to use public funds to help the bank.

Eurozone banks that are told they have holes in their balance sheets will have just two weeks this autumn to come up with plans to plug the gap, according to new information from the European Central Bank, the Financial Times reported. The Frankfurt-based regulator on Thursday published an update of its plans as it prepares to carry out stress tests in the coming weeks on 128 of the largest banks across the eurozone before it takes over supervision of the lenders in November.

Austria must add about 8 billion euros ($11 billion) liabilities of state-owned KA Finanz AG to its accounts, the European Union said, putting further pressure on the country’s debt burden, Bloomberg News reported. The EU’s statistics office Eurostat told Austria to change the classification of KA Finanz, the wind-down unit for failed Kommunalkredit Austria AG, and revise government statistics for the past five years, according to a letter posted on Eurostat’s website.

The administrator of insolvent German bookseller Weltbild said on Wednesday he had broken off talks with investor Paragon Partners and agreed to do a deal with restructuring specialist Droege International Group instead, Reuters reported. Droege will participate in a 20 million euro ($27.1 million) capital increase at Weltbild and in return receive a 60 percent stake in the group, administrator Arndt Geiwitz said. It will also give Weltbild an unspecified loan.

Portugal Telecom and Oi of Brazil said on Wednesday that they had renegotiated the terms of their planned merger to salvage a deal threatened by the financing problems of the Espírito Santo group, which is controlled by Portugal’s most powerful family, the International New York Times reported. As part of the revised merger plan, Portugal Telecom will receive a 25.6 percent stake in the merged entity, down from almost 40 percent when the deal was announced in October.

Croatia's central bank on Wednesday ordered the liquidation of a small private bank, saying it had more liabilities than assets and had failed to meet supervisory requirements. "The central bank board has decided to propose opening bankruptcy proceedings for Nava Banka," the central bank said in a statement after a board meeting. The decision was taken after determining the bank had failed on three counts, it said.

The Central Bank has warned of a potential mortgage arrears time bomb as the high number of interest-only loans taken out during the boom revert to full-repayment arrangements, the Irish Times reported. While interest-only arrangements have been widely used as a means of forbearance in the current arrears crisis, just over 8 per cent of the total mortgage loan book - equating to €7.4 billion - were originally issued on an interest-only basis.

A Florida federal bankruptcy judge on Tuesday approved Brazilian bank Banco Cruzeiro do Sul SA's petition for Chapter 15 bankruptcy, a decision that will provide the bank some protection in United States courts while it continues its primary insolvency proceedings in Brazil, Law360 reported. U.S. District Court Bankruptcy Judge Laurel M. Isicoff granted recognition to the bank's petition for Chapter 15 bankruptcy, which was filed on June 5, saying that the bank's foreign representative, Eduardo Felix Bianchini, is qualified and granting the bank protection in U.S. courts.

As Argentina’s multi-billion dollar showdown with its hedge fund creditors nears its finale, global organisations are trying to hammer out a plan that will prevent such a stand-off from being repeated, the Financial Times reported. For the past six months, debt issuers, market intermediaries and investors have been discussing a new idea that would make it more difficult for small numbers of recalcitrant creditors to “hold out” against a critically indebted country that restructures its debt.

Austria must add about 8 billion euros ($11 billion) liabilities of state-owned KA Finanz AG to its accounts, the European Union said, putting further pressure on the country’s debt burden, Bloomberg News reported. The EU’s statistics office Eurostat told Austria to change the classification of KA Finanz, the wind-down unit for failed Kommunalkredit Austria AG, and revise government statistics for the past five years, according to a letter posted on Eurostat’s website.