Bank of Portugal to Rebuff Court Rulings Over Goldman Sachs Loanby
Portugal’s central bank said it will stick by a decision to impose losses on a loan set up by Goldman Sachs Group Inc., even if the U.S. lender wins a court challenge.
The $835 million loan should remain in a bad bank because it was made to institutional investors, the Bank of Portugal said in resolutions passed at a Dec. 29 meeting and released late on Wednesday. Any court decisions saying the loan was put in the bad bank on an improper basis wouldn’t affect that, it said.
The dispute centers on how the Bank of Portugal divided Banco Espirito Santo SA into good and bad banks following the lender’s failure in 2014. The central bank says it is focusing losses on institutional investors to maintain depositors’ confidence in the national banking system, while fund managers complain they have been treated unequally and saddled with significant losses.
Goldman Sachs is arguing in a U.K. court that its loan, which was made to Banco Espirito Santo weeks before the collapse, should be in the good bank. The loan was initially put there before being transferred to the bad bank, where full repayment is much less likely. The Bank of Portugal cited Goldman’s stake in Banco Espirito Santo as a reason for the switch.
Goldman Sachs declined to comment on the Bank of Portugal’s statement. The loan was made through Oak Finance Luxembourg SA, a special-purpose vehicle.
The central bankalso last month moved about 2 billion euros ($2.2 billion) of senior bonds to the bad bank from Novo Banco SA, the good bank that emerged from Banco Espirito Santo. Bondholders were blindsided by the move because the Bank of Portugal previously said it could fill a capital shortfall at Novo Banco through measures including asset sales.