Banco Espirito Santo Tries to Calm Capital Worries

NEW YORK (The Deal) -- Portugal's Banco Espirito Santo SA late Thursday insisted it would be able to absorb potential losses incurred through exposures to its largest shareholder after its shares plunged 17% and triggered a market rout.

The lender revealed that it has a capital exposure of 1.18 billion euros ($1.61 billion) to 25.1% owner Espirito Santo Financial Group, and a €2.1 billion capital buffer above the minimum regulatory requirement.

"Banco Espirito Santo's executive committee believes that the potential losses resulting from the exposure to Espirito Santo Group do not compromise the compliance with the regulatory requirements," it said late Thursday.

But the lender said it has to wait until Espirito Santo Group releases its restructuring plan before assessing its own potential losses, leaving nervous investors and markets in the dark for a bit longer.

Ruling out increasing its exposure to Espirito Santo Group, it also provided further information about what it has tied up with other Espirito Santo Group entities, as well as about debt securities issued by that family of companies and held by its own clients.

Those debt securities include 255 million euros in commercial paper issued by Espirito Santo International; 342 million euros in commercial securities issued by Rioforte; 44 million euros in commercial paper issued by Rioforte subsidiaries Espirito Santo Saude and Espirito Santo Property, and 212 million euros in commercial paper and bonds issued by Espirito Santo Financial Group and its subsidiaries.

However, it said that funds it manages had no material exposure to Espirito Santo Group companies.

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