* Analysis is not a formal investigation yet - source
* PT bought 897 mln euros in Rioforte debt, due this month
* Rioforte parent ESI has already missed some debt
* PT's Brazilian partner Oi seeking to protect its
LISBON, July 10 Portugal's securities market
watchdog, CMVM, is analysing a major investment by Portugal
Telecom in the debt of Rioforte, a holding company of
the Espirito Santo banking family whose companies are under
regulator scrutiny, sources said.
One source familiar with the situation told Reuters that
CMVM wanted to find out whether any rules had been breached by
any of the parties involved, in particular whether PT obeyed
disclosure rules in the 897 million euro ($1.2 billion) deal,
that could affect its own financial situation.
Another source said the regulator's analysis was not yet a
CMVM officials declined to comment. Nobody was available to
comment at Portugal Telecom, which has previously defended the
investment as based on a long history of such investments with
the Espirito Santo group and offering a good rate of return.
PT last month said it had invested 897 million euros in
commercial paper issued by Rioforte, which falls due on July 15
and 17. Its shares have tumbled on fears it may not get the
money back after auditors revealed financial irregularities at
Rioforte's parent company, Espirito Santo International.
ESI has already failed to reimburse at least some debt
holders on maturity, according to Banque Privee Espirito Santo.
Rioforte's unit Espirito Santo Financial Group (ESFG)
is the largest shareholder in Banco Espirito
Santo (BES) which in its turn is the largest single
shareholder in Portugal Telecom, with a 10 percent stake. PT
also owns a stake in BES.
ESFG said on Thursday it had decided to suspend trading in
its shares and bonds, citing "material difficulties" at its own
parent company, in news that hit European stock and bond markets
alike on Thursday.
PT is in the process of merging assets with Brazil's
telecoms company Oi, whose shares have also been
punished. Its management has vowed to protect shareholders and
seek a solution.
Analysts say Oi may seek to revise the terms of the merger
with PT if Rioforte does not pay up, and PT shareholders may end
up with a much smaller stake in the combined company.
PT shares fell 4.5 percent on Thursday to 1.91 euros, near
their all-time lows of 1.89 euros. BES shares plunged more than
17 percent before trading in the issue was suspended.
($1 = 0.7331 Euros)
(Reporting by Sergio Goncalves; Writing by Andrei Khalip;
Editing by Axel Bugge and Hugh Lawson)