BES bond switch – Kuwait joins IBM and Pimco in suing Portugal’s government
The shifting of debt, in 2015, from Novo Banco back to BES continues to plague the man that planned the move, Carlos Costa, the governor of the Bank of Portugal (pictured hard at work) whose litany of poor decisions has cost the country’s taxpayers billions of euros during his tenure.
The Portuguese Republic now is being sued by a group of international investors who were ripped off when the Bank of Portugal shifted BES senior debt to Novo Banco and, a year later, switched it back to BES ‘bad bank’ thus rendering the investments close to worthless.
The submission to the Lisbon Administrative Court on 3 December, was lodged on behalf of the Pimco Low Duration ESG Fund, Pimco Global Bond Opportunities Fund, Kuwait Investment Authority and the IBM Personal Pension Plan Trust.
At stake is the decision of the Bank of Portugal’s governor, Carlos Costa on December 29, 2015. Costa decided to return some senior debt securities to BES, but not all of them as only five were returned out of a total of 52 held at Novo Banco.
The governor’s action may have broken a European Banking Directive which states that all of those in a class of creditors must be treated equally.
Some of these big-hitters already are suing the Bank of Portugal through their involvement in the Novo Note Group.
Many of these funds have been boycotting Portugal’s debt issues in a show of displeasure at the way they were treated by Costa who said one thing and did the opposite, rendering their investments valueless.
Protection of private property, equal treatment, prohibition of discrimination and the principle of legal certainty and security are aspects that will be pushed home by the investment funds’ lawyers.
The court action is going ahead despite attempts by the Portuguese Government, which was against bank of Portugal’s decision, to reach an agreement with these investors.