Investors Aren't Very Happy With Portugal's Bank Bond Decision
A key debt concept is at risk, some say.
Banco Espirito Santo, or BES, once Portugal’s biggest publicly traded lender.
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Pari passu, perished?
Earlier this morning, Portugal's central bank appeared to take aim at a key concept in the world of debt investing by inflicting losses on some —but not other—bank bonds. Five senior bonds worth about 2 billion euros ($2.1 billion) are being transferred from Novo Banco SA to Banco Espirito Santo SA, the bad bank that emerged from the breakup of the lender last year and which is due to be liquidated sometime in the near future. The move is meant to help recapitalize Novo Banco following a lackluster showing at the European Central Bank's stress tests.