Portugal Telecom (PT) CEO Henrique Granadeiro has resigned, just a few weeks after Rioforte’s default on a debt payment to the Portuguese incumbent forced it to accept a lower stake in its merger with Brazilian operator Oi.
Granadeiro submitted his…
Portugal Telecom (PT) CEO Henrique Granadeiro has resigned, just a few weeks after Rioforte’s default on a debt payment to the Portuguese incumbent forced it to accept a lower stake in its merger with Brazilian operator Oi.
Granadeiro submitted his resignation at a shareholders meeting yesterday, PT said in a statement.
The board of directors stressed that neither it nor the executive committee discussed or approved any investment in debt issued by Rioforte, a holding company of troubled Espirito Santo group, whose banking unit Banco Espirito Santo (BES) is set to be bailed out, before the matter was reported in the media.
Rioforte missed a mid-July deadline to repay €847m (US$1.1bn) of commercial paper owed to PT, resulting in the telco’s stake in the Oi merger falling from 37.4% to 25.6%.
The PT board added that it has mandated PwC to conduct an independent analysis of all PT’s investments in Espirito Santo group debt. Auditor KPMG had already found Espirito by to be in a serious financial condition in May.
Portuguese media have cited a letter by Granadeiro as saying he is sure the independent analysis will prove he always acted in the best interests of PT and its stakeholders. Granadeiro reportedly did not indicate whether he had approved the Rioforte investment, but said he was surprised by the default.
No successor to Granadeiro was named in PT’s statement.
A shareholder meeting has been set for 8 September at which the merger will be discussed. The Lisbon-based telco had contributed 100% of its assets to the Brazilian operator as part of a rights issue earlier in the year in exchange for the 37.4% stake in the merged business, which was based on its balance sheet.
PT will now see its stake in the combined entity fall to 25.6% but, under a new arrangement, it will have the option to later buy more shares to take its stake to where it would have been.
The fallout from the Rioforte default has reportedly left PT planning to file one lawsuit and facing another. The telco is said to be considering suing Espirito Santo, Reuters cited sources close to the process as saying in mid-July.
Meanwhile, several minority investors are reportedly preparing to sue the board over its decision to purchase the Rioforte debt.
Rioforte holds a 49% stake in Espirito Santo Financial Group, which in turn holds 20% of BES. The investment bank owns 10% of PT’s stock.
Last Sunday, the Portuguese central bank unveiled a €4.9bn (US$6.6bn) bailout plan for BES. It will see Portugal’s second-largest private financial institution split into a ‘bad bank’, which will keep the ‘toxic’ assets, and a’ good bank’ renamed Novo Banco that will be recapitalised by a special bank resolution fund.
