Banco Espirito Santo Rises on Goldman, D.E. Shaw Stakes

NEW YORK (The Deal) -- Investors in Banco Espirito Santo bet on Wednesday that the Portuguese lender can avoid being subsumed by the debt troubles of affiliates after the bank hired Deutsche Bank for advice and disclosed two significant shareholders.

The Lisbon institution said Deutsche Bank will "assess the potential optimization of BES's balance-sheet structure," and at the same time disclosed stakes held by Goldman Sachs Group Inc. and New York hedge fund D.E. Shaw & Co. LP. The lender said the latter's shareholding was a "long economic position" rather than a short-selling exercise on the assumption the stock will fall. Goldman Sachs now owns 2.27% of its share capital after exceeding the 2% threshold on July 15, while D.E. Shaw owns 2.71%, the Portuguese lender added.

Banco Espirito Santo shares were up 5.5% Wednesday morning in Lisbon at 0.44 euros, giving it a market value of around 2.5 billion euros (3.4 billion).

Banco Espirito Santo is already taking legal advice from Linklaters LLP in connection with Espirito Santo International SA's request to a Luxembourg court, accepted Tuesday, for protection from creditors. Luxembourg-based Rio Forte Investments SA has also requested creditor protection under Luxembourg law.

Espirito Santo Internationl owns 39% of Espirito Santo Financial Group SA, which is Banco Espirito Santo's largest shareholder with a 20% stake.

Concerns that debt woes at Espirito Santo International and at wholly owned Rio Forte Investments SA, the holding company for non-financial assets including real estate, would spill over to its banking affiliate roiled European markets earlier this month.

Banco Espirito Santo, controlled for years by Portugal's powerful Espirito Santo family, has said that it has a 2.1 billion euro capital buffer above the minimum regulatory requirement, while the head of the country's central bank said last week that Banco Espirito Santo shareholders are willing to inject extra capital if needed.

The lender is due to release first-half results on July 30, followed a day later by an extraordinary general meeting to vote on a board reshuffle to replace members of the Espirito Santo Family.

On Tuesday, Espirito Santo Financial Group also announced the resignation of Moroccan billionaire Othman Benjelloun from its board with immediate effect.