(Updates with share sale, updates prices)
By Andrei Khalip
LISBON, July 14 Portugal's troubled Espirito
Santo clan was forced to sell a chunk of the bank it founded and
accept independent managers on Monday after the lender's links
to the family unsettled international markets.
An audit of the family-owned holding companies behind Banco
Espirito Santo found financial irregularities that
raised the prospect of potentially destabilising losses at the
country's largest listed bank.
The news last week sent Portugal's debt and stock markets
into turmoil that spread to Europe as well as other firms in the
Espirito Santo family's sphere.
Portugal Telecom, waiting to be reimbursed on over
$1 billion in debt issued by one of the family holding
companies, was hard hit.
Pressured by Portugal's central bank, BES announced on
Monday that its board had put in place new executives -
including economist Vitor Bento as chief executive - hastening
changes not due to happen until the end of the month in order to
distance itself from the family group.
Bento is joined by new chief financial officer Joao Moreira
Rato, who headed Portugal's IGCP debt agency, and new deputy CEO
Jose Honorio. Together they will replace Espirito Santo family
members including its patriarch Ricardo Espirito Santo Salgado,
who had already agreed to resign, and other board members loyal
to the family.
"TIME HAS BEEN LOST"
With Bento starting work at BES on Monday, television trucks
arrived outside the bank's Lisbon headquarters from early
Portugal's Negocios business newspaper has called on the new
management to seek bankruptcy for the Espirito Santo group, and
for regulators to open investigations against the former CEO and
"BES will be saved from the family. But time has been lost
and now has to be recovered," it said in a commentary on Monday
after warning on Sunday that delays in resolving the issue
threatened to throw Portugal back into recession.
BES has insisted that any losses relating to its 1.15
billion-euro exposure to Espirito Santo holdings would not put
it at risk, and the government has said BES - the only major
Portuguese bank that did not request state aid under a bailout
during the country's debt crisis - is solvent. Lisbon exited the
three-year EU- and IMF-funded bailout in May.
While investors around Europe worry about the impact of
financial problems at BES, the Portuguese public are also coming
to terms with the fall from grace of a family that has long been
at the heart of the country's business elite.
"It's kind of scary to see these guys, who everyone knew as
the owners of Portugal, leaving such a great mess behind. But we
all knew the Espirito Santos had nothing holy about them," Luis
Palma, a 46-year-old taxi driver, said, referring to the family
name that translates as the Holy Spirit.
Salgado has said in a newspaper interview that he and the
bank had no knowledge of the problems at the
Luxembourg-registered Espirito Santo International SA after an
audit carried out earlier this year and made public in May found
a "serious financial condition" there.
Reuters contacted ESI for comment but received no reply.
BES shares, which have lost over half of their value in the
past month, closed 7.48 percent lower at 0.4450 euros on Monday,
but the broader market in Lisbon rose, including Portugal
Telecom, up 1.963 percent off all-time lows hit last week.
As part of the family's moves to loosen its grip on BES,
Espirito Santo Financial Group (ESFG) - the bank's main
shareholder - said after markets closed on Monday that it had
sold a 4.99 percent stake at 0.34 euros a share. That reduced
its holding in the bank to 20.1 percent.
"The sale of the 4.99 percent stake in the bank was made to
raise proceeds to enable ESFG to satisfy its repayment
obligations under a margin loan," ESFG said in a statement.
"The proceeds of the sale, together with certain other
collateral held by the lending bank, will result in the full and
final payment of the margin loan and fully extinguishes all
obligations thereunder," it said.
ESFG is part of the business empire of the Espirito Santo
family - a vast conglomerate with holdings in banks, hotels and
healthcare - which founded BES, the country's largest listed
bank by assets.
The family lost control of BES in a billion euro capital
raise completed in June.
As part of Monday's statement, ESFG said it had applied for
a waiver in order to get around a 180-day lockup period linked
to the bank's rights offer in order to enable it to sell the
($1 = 0.7331 Euros)
(Additional reporting by Axel Bugge; writing by Sophie Walker;
editing by Giles Elgood and Philippa Fletcher)