Goldman Sachs Group Inc. (GS) loaned Portugal’s Banco Espirito Santo SA $835 million in July, just weeks before the group’s units sought creditor protection in a cascade of insolvencies that resulted in the lender’s bailout.
Goldman Sachs made the loan through Oak Finance Luxembourg SA, an investment company that raised funds destined for a Venezuelan oil refinery project, according to the unit’s offer document.
Banco Espirito Santo, once Portugal’s biggest publicly traded lender by market value, was bailed out Aug. 3 after it disclosed potential losses on loans to other Grupo Espirito Santo companies and regulators ordered the lender to raise more capital. The bank was split in two with deposits and healthy assets becoming Novo Banco in a bailout by the central bank’s Resolution Fund.
The Wall Street Journal reported earlier today that Goldman Sachs sold some of Oak Finance’s securities at a loss to hedge funds and the New York-based firm is still holding some of the debt, citing a person it didn’t identify.
An official for Goldman Sachs in London declined to comment. Novo Banco does not comment about operations that involve clients, said a spokeswoman, who asked not to be named in line with company policy. Officials for Portugal’s central bank didn’t have an immediate comment.
Goldman Sachs had agreed to the funding on May 16, the offer document shows. Four days later, Banco Espirito Santo warned investors buying stock in its rights offer of irregularities in the accounts of a parent company and that the “serious financial situation” of the parent firm could be damaging to the bank’s reputation. Regulators are examining how the group’s companies helped fund each other.
To contact the reporter on this story: Ambereen Choudhury in London at firstname.lastname@example.org
To contact the editors responsible for this story: Simone Meier at email@example.com Elisa Martinuzzi, Jon Menon