Home News Novo Banco to convert Espirito Santo debt to deposits: source

Novo Banco to convert Espirito Santo debt to deposits: source

Published on 29/09/2014

The holders of senior debt in bankrupt Portuguese group Espirito Santo from Monday will be able to transfer their investments into deposits with Novo Banco, a bank source told AFP.

Novo Banco, the “good bank” created by a state bailout of troubled Portuguese lender Banco Espirito Santo, has inherited the debt from its troubled parent after the collapse of the business empire of its founding Espirito Santo family.

Under the plan, customers will be able to transfer their debt from the market and turn the proceeds into deposits at a three-year interest rate of 2.71 percent, which can be released after one year.

To compensate clients’ losses due to the depreciation of their securities on the markets, Novo Banco is also ready to convert 75 percent of the difference between their initial investment and the proceeds of the sale into deposits at a 10-year rate of 4.25 percent.

This offer should allow clients to “recover their capital in one to three years, given the market conditions of the last week,” said the source.

The plan, which does not include holders of subordinated debt, is the first initiative of new chief executive Eduardo Stock da Cunha who took the reins of Novo Banco in mid-September after the surprise departure of Vitor Bento.

Novo Banco, which holds the healthy assets of BES after a 4.9 billion euro bailout by Lisbon and the banking system, is to be sold “as soon as possible,” Prime Minister Pedro Passos Coelho said earlier this month.