A&O, Linklaters and VdA help secure rescue of Portugal’s Banco Espirito Santo

Allen & Overy (A&O), Linklaters and Portuguese firm Vieira de Almeida (VdA) have been instructed on the restructuring and rescue of Portuguese Banco Espírito Santo (BES).

The Central Bank of Portugal announced at the weekend that BES was to be split in two, with the bulk of its assets and liabilities transferred to a successor bank, Novo Banco.

Linklaters is acting for BES and Novo Banco, with VdA and A&O instructed by the central bank.

The move follows BES’s announcement last week of significant losses arising in part from exposure to companies associated with the Espírito Santo family interests, which have commenced protective proceedings in Luxembourg and Portugal. As a result, the losses reduced BES’s Tier 1 capital to below the minimum regulatory threshold.

The assets and liabilities which have not been transferred to Novo Banco principally relate to the banking relationships with the companies associated with the family interest. The subordinated debt of BES, plus any liabilities associated with its capital raising activities will also remain in the bank. New management will supervise the realisation and distribution of BES’s assets.

Novo Bank is 100 per cent owned by the Portuguese bank resolution fund, which has provided €4.9bn (£3.9bn) of capital for the acquisitoin. The resolution was effected in the context of the introduction of the new European Banking Recovery and Resolution Directive.

The Linklaters team advising BES on the transaction included Lisbon partners António Soares and Pedro Siza Vieira and London partner David Ereira.

The central bank turned to VdA, which fielded a team including banking partners Pedro Cassiano Santos and Paula Gomes Freire, M&A and corporate finance partners Jorge Bleck and João Vieira de Almeida. It also featured competition partner Miguel Mendes Pereira and public law partners Paulo Pinheiro and Rodrigo Esteves de Oliveira. Bleck joined VdA last year from Linklaters, having previously been Portuguese managing partner for the magic circle firm (3 September 2013).

Ereira said the resolution and rescue had no expected costs for Portuguese taxpayers, and would provide a template for the operation of the European bank resolution scheme in the future.

The European Central Bank is currently undertaking balance sheet assessments of significant Eurozone banking groups, before the implementation of a single supervisory mechanism in November this year.