* Total potential losses of 3 bln euros cut by 20 pct so far
* Three more banks to respond next week
* Interest, potential losses exacerbate public debt woes
LISBON, April 26 Portugal's government said on
Friday it would challenge in court several high-risk hedge
contracts signed by public companies and banks JPMorgan
and the local unit of Spain's Santander to avoid losses
for the debt-ridden state.
Treasury Secretary Maria Luiz Albuquerque said the
government had managed to renegotiate some swap contracts
containing "highly speculative elements" with other banks,
cutting by 20 percent potential liabilities from swaps that
could total 3 billion euros ($3.9 billion).
It is awaiting responses next week from three other banks,
which she did not identify.
Rising debts at public companies, especially in the
transport sector, have hindered Portugal's fiscal adjustment
programme under its EU/IMF bailout, secured in mid-2011.
The companies most exposed to heavy interest payments from
the swap contracts are the Lisbon Metro and the Porto Metro.
These and several other firms took out contracts between
2003 and 2010 from international banks, including Credit Suisse
, Deutsche Bank, BBVA, and Merrill
Lynch, and local lenders, to protect against
any rise in Euribor interest rates.
The move backfired as Euribor rates slumped in the past few
years, exacerbating the debts of the companies which are owned
by the state or regional authorities.
"It was not possible to reach an agreement with Santander
Totta and JPMorgan, so the state will proceed to defend its
interests by resorting to competent courts," Albuquerque said,
without saying how much the swaps were worth.
"Three other banks requested the first few days of next week
to ponder on accepting the terms of the proposal made to them,"
she added, without giving further details.
The contracts already renegotiated will save public
companies and the state 170 million euros in interest and around
600 million in potential liabilities.
The government will send all its findings to the Prosecutor
General's office, which will decide whether to open criminal
cases against managers who signed the deals.