Boston, MA 09/02/2014 (wallstreetpr) – Goldman Sachs Group Inc (NYSE:GS) lent $835 million to Portuguese bank Banco Espirito Santo SA (ELI:BES) in July before the Portuguese government forced to bail out the beleaguered bank from insolvencies.
Transaction between GS and BES
In May 16, 2014, Goldman Sachs Group Inc (NYSE:GS) agreed to fund BES and brought Banco Espirito Santo SA (ELI:BES)’s bonds worth of $835 million through a special investment vehicle (SPV) Oak Finance Luxembourg SA to raise funds for the Venezuelan oil refinery project.
Four days later, BES warned its investors in buying the stock due to irregularities in its parent company’s account (Espirito Santo), which owns 20% stake in BES. So, the regulators initiated the investigation how the group of companies transacts with each other.
Bail out from Portugal’s government
The Portugal’s bank came to collapse due to extensive exposure of bad debts by its parent Company (loss of ~$4.9 billion) that lead to potential loss on loans and failed to raise the capital.
The government helps the bank through bailout of €4.9 billion ($6.55 billion) on August 3, 2014. The central bank said that the loss incurred to BES is due to the fraud funding patterns by Espirito Santo companies.
The bank, though, got the support from the central bank’s Resolution Fund and split into two based on deposit and healthy assets as Novo Banco. But, it still has some of the debt that lead to significant incurring losses and also failed to regain the investors’ confidence as they witness severe losses.
Goldman Sachs Group Inc (NYSE:GS), on the other end, still holds the debt though the investment bank sold some of the securities, which hold by Oak Finance, at a loss to hedge funds. As a result, the Wall Street’s investment bank failed to shift the debt that lead to loss from the transaction.
Officials from the Goldman Sachs Group Inc (NYSE:GS), Novo Banco and Portugal’s Central Bank declined to comment on the transaction.
