(Adds details, Granadeiro's letter)
LISBON Aug 7 Henrique Granadeiro, the chief executive officer of Portugal Telecom SGPS, resigned on Thursday, the company said, three weeks after it was forced to take a cut in its share of a merger with Brazil's Oi due to a debt deal that went wrong.
Portugal Telecom said in a statement its executive board had never approved or even discussed any investment in debt issued by Rioforte, a holding company of the crumbling business empire of Portugal's Espirito Santo banking family.
It also contracted PWC to audit all investment in the Espirito Santo Group debt made by Portugal Telecom.
The company did not say who will replace Granadeiro, 70, but called a shareholder meeting for Sept. 8 to discuss its next steps and all aspects of the merger.
In a letter cited by the Portuguese media, Granadeiro said he was "sure the independent audit will show that I always acted in the interests of PT, its employees and its shareholders". He said he was surprised by the Espirito Santo debt default, but did not say if he had personally approved the investment.
Portugal Telecom had failed to inform its Brazilian merger partner Oi that it held 900 million euros in debt issued by a holding company. The holding defaulted on the debt last month and Portugal Telecom was forced to accept a lower stake in the new merged company with Oi.
Granadeiro was appointed CEO of Portugal Telecom in June 2013 after his predecessor Zeinal Bava went to Brazil to head Oi and oversee the combination of assets of the two companies. Granadeiro was also chairman of the board at Portugal Telecom, and resigned from that position as well.
Portugal Telecom shares have lost 57 percent of their value since the start of the year, mostly in the past two months after problems at the Espirito Santo group surfaced. Rioforte and several other family holdings are now under creditor protection.
The problems culminated in last Sunday's 4.9 billion euro rescue of Banco Espirito Santo - one of the country's largest lenders that had a 10 percent stake in Portugal Telecom - mostly with state loans. The lender's exposure to family assets was left in a "bad bank" that will be wound down while a new, healthy bank will be sold off to investors.
(Reporting By Andrei Khalip, editing by David Evans)