Espírito Santo International has submitted a 'controlled management' application to the Luxembourg financial authorities to shield the holding company from creditors.
This application was delivered at the close of business today, Friday 18th July 2014.
The restructuring plan is to be debated and inevitably approved by Espírito Santo International shareholders at the annual general meeting scheduled for 29 July 2014.
"Espírito Santo International is the holding company of the Espírito Santo Group and owns 100% of Rioforte which is responsible for managing businesses in real estate, tourism, agriculture, health and energy of the Espírito Santo Group. Through Rioforte, Espírito Santo International has a indirect participation (49%) in Espírito Santo Financial Group SA which manages the Group's interests in the financial sector, particularly Banco Espirito Santo in Portugal, Banque Privée Espírito Santo in Switzerland and Tranquilidade," according to the statement issued this evening.
The holding company based in Luxembourg is in a state of technical bankruptcy as unrecognised liabilities of €1.2 billion have been uncovered. The holding company justifies the protection measure as it is not "able to meet its obligations due to the maturity of a significant portion of their debt."
The group is now involved in selling off assets, such as BES Saúde, Tivoli Hotels and Tranquilidade Insurance, and renegotiating the terms of its €7 billion debt by converting most of it into Rioforte preference shares.
The plan will be submitted to the shareholders of Espírito Santo International, 56% controlled by the Espírito Santo family, at a general meeting scheduled for 29 July.
Espírito Santo International is the "holds 100% of Rioforte which, in turn, owns 49% of Espírito Santo Financial Group, the largest shareholder of BES, with 20% of its capital."
The application for ‘controlled management’ involves the appointment of one or more financial experts who will prepare a recovery plan and will oversee the distribution of assets to creditors.
"Espírito Santo International believes that the controlled management regime will defend the interests of its creditors in a transparent and orderly manner under the control of the courts and its appointed officials,” explains the press release to the market.
“Once approved, this scheme will halt all actions taken by creditors to allow the implementation of a management plan and the distribution of assets under the control of a court."
Espírito Santo International pointed out that "creditors will be informed of progress in a timely and appropriate manner," a novelty from this secretive company.
The court can authorise the directors of the insolvent company to remain in office unless it has evidence or suspicion that there have been serious irregularities or mismanagement.
In the case of Espírito Santo International, the directors are highly unlikely to be continuing in any responsible role due to the serious accounting irregularities outlined in the audit requested by the Bank of Portugal where €1,2 billion was hidden in annual accounts since 2008.
