Luxembourg court declares Espirito Santo holdings bankrupt

Two holding companies of Portugal’s bailed out Espirito Santo banking group have been declared bankrupt by a Luxembourg court, an official announcement said Friday.

The widely expected bankruptcy ruling of Espirito Santo Financial Group (ESFG) and Espirito Santo Financiere (ESFIL) came one week after the same court refused a request for creditor protection for the entities.

The companies are part of the complex web of assets that controlled the fortune of Portugal’s prominent Espirito Santo family, including one of the country’s biggest banks.

The collapse of Banco Espirito Santo (BES) came just months after Portugal successfully emerged from a 78-billion-euro ($99-billion), three-year bailout financed by the EU-IMF.

The bank descended into dire straits in July after reporting a record loss that exposed deep problems in its three holding companies and sparked allegations of multinational accounting fraud.

The BES bank was brought down largely by suspected improper accounting practices in the Espirito Santo Group built through mostly Luxembourg-based holding companies.

Faced with a potentially catastrophic bank failure, Portuguese authorities swooped in and split the lender into two banks: one to comprise the bank’s viable assets, the other a so-called “bad bank”, housing toxic debts.