Portugal's Largest Bank Misses Bond Payment; Bonds Collapse

Tyler Durden's picture


Brussels, we have a problem. As we warned 6 weeks ago, Espirito Santo International SA - is in a "serious financial condition" according to a central bank driven external audit by KPMG identified "irregularities in its accounts." Sure enough, the 'ponzi-like' maneuvers have left the bank unable to pay its bonds as Bloomberg reports bonds plunged to record lows after a parent company delayed payments on short-term notes. More importantly, given the divisively dependent nature of the domestic sovereign bond market (and hence the health of the EU) and its banking system, it is noteworthy that Portuguese bond risk has surged to 4 month highs with the biggest 2-day spike in a year. As one analyst noted, “The bigger question is whether the government will have to get involved,” leaving the EU taxpayer on the hook once again (for fear of M.A.D. threats) as most critically, it "will have to step in to prevent systemic repercussions?"



As Bloomberg reports,

Banco Espirito Santo has been “adequately isolated” by the Bank of Portugal from the financial problems, Parliamentary Affairs Minister Luis Marques Guedes said on July 3. The bank was the only one of the three biggest publicly traded Portuguese lenders that didn’t request state aid after the country received a European Union-led bailout in May 2011.


Banque Privee Espirito Santo SA said yesterday the delay in payments of some debt securities issued by parent company Espirito Santo International affects “only a few clients.” Some investors have been asked to swap the commercial paper for stock and new long-term securities, according to Portuguese newspaper Expresso.


“The news flow in the last few days is confirming investors’ suspicions over how extensive problems are at the top of the group,” said Roger Francis, an analyst at Mizuho International Plc in London. “The market has huge uncertainty with reports of payments being missed and debt for equity swaps circulating widely.”

*  *  *

Of course the government says its "contained" - now where have we heard that before?


Charts: Bloomberg

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Wed, 07/09/2014 - 08:44 | 4938943 Sudden Debt
Sudden Debt's picture

don't run to the bank... TAKE YOUR CAR!!!

Wed, 07/09/2014 - 08:46 | 4938949 semperfidelis
semperfidelis's picture

Waaaat? Wasn`t this fixed long ago? Like 2010? Aren`t we in a re-co-ve-ry? This will be the Amy Winehouse recovery, where the patient dies in the end...

Wed, 07/09/2014 - 08:51 | 4938977 kliguy38
kliguy38's picture

NOT SHIT.......they promised me its fixed....They can't do this to me.....BWAAAAAAAAA

Wed, 07/09/2014 - 08:58 | 4939010 CH1
CH1's picture


Wed, 07/09/2014 - 09:03 | 4939028 GetZeeGold
GetZeeGold's picture



You'd have a better chance of getting hit by lightning than a default.


Pretend and extend......just make it happen.

Wed, 07/09/2014 - 09:05 | 4939036 knukles
knukles's picture

Didn't know Portugal was part of the South Stream pipeline deal (sarc)

Wed, 07/09/2014 - 09:13 | 4939066 Haus-Targaryen
Haus-Targaryen's picture



Wed, 07/09/2014 - 09:16 | 4939072 dontgoforit
dontgoforit's picture

They've got all their fingers stuck in this dyke - next they'll be trying to use their pee pees.

Wed, 07/09/2014 - 09:26 | 4939107 Tabarnaque
Tabarnaque's picture

Who ever decided to call debt certificates a store of value?!... I like that shinny yellow metal in the palm of my hand. And I think that for those of us who think the same, we are going to experience a heck of a nice ride in the months ahead.  

Wed, 07/09/2014 - 10:15 | 4939316 COSMOS
COSMOS's picture

NO PROBLEMO folks, make the bond holders whole while making the depositors take a Cypress style SCALPING

Move right along nothing to see


Wed, 07/09/2014 - 10:59 | 4939502 donsluck
donsluck's picture

No, that would be how it's SUPPOSED to work. At least partially. A classic (before TBTF) bank failure would be: wipe out the stock holders (and owners and officers), wipe out the un-insured depositors, the bondholders are the stockholders of the new bank all supervised by the courts. Orderly and predictable. The <$100,000 depositors are protected by FDIC insurance.

Wed, 07/09/2014 - 12:11 | 4939806 effendi
effendi's picture

dontgoforit, dykes won't let pee pees be stuck in them (they are lesbians).

Wed, 07/09/2014 - 08:52 | 4938981 Tall Tom
Tall Tom's picture

On a long enough timeline the survival rate for everybody drops to zero.


Hedge accordingly.

Wed, 07/09/2014 - 10:10 | 4939296 max2205
max2205's picture


Wed, 07/09/2014 - 08:55 | 4938991 PhilB
PhilB's picture

Title is all wrong. It is NOT the bank, Banco Espirito Santos, that missed the payments. Its the Espirito Santos family Holding Company which owns 25% of the bank. 

That said, the failure is still very glaring in the sense that Banco de Portugal (their central bank), had regulatory authority over the hoilding company and was only now through an external audit, that this black hole has come to light.

Just shows you how much crap is still under the hood in many financial institutions in Europe. This is why they are rushing to change the regulatory authorities and build buffers. But I expect more victims to come.

Wed, 07/09/2014 - 09:07 | 4939044 Portuguese Revo...
Portuguese Revolutionary's picture

The central bank (Banco de Portugal) are just a bunch of useless breathers. The debt crisis that we find ourselves in, here in Portugal, was completely avoidable because they knew everything that was going on but they did not do anything because the politicians were filling their pockets.

Have you ever heard of EFFICIENT central bank regulations and oversight? I haven't!

Wed, 07/09/2014 - 09:31 | 4939131 Tabarnaque
Tabarnaque's picture

The ECB or the Troika won't bring any better oversight either. They are just as criminal as all the others. The only difference is that they have a different agenda.

Wed, 07/09/2014 - 10:17 | 4939325 shovelhead
shovelhead's picture

Their job is to patch the tires on the croney-mobile until there's no rubber left.

They can only be efficient to that point.

Wed, 07/09/2014 - 13:21 | 4940164 crazybob369
crazybob369's picture

So what you're saying Revo is that nothing has really changed since 1974.

Wed, 07/09/2014 - 09:08 | 4939048 knukles
knukles's picture

So she's the one been causing all that credit card debt?  A mere isolated case.  The rest of the world is OK.
Buy accordingly anything you can getchur hands on at any inflated prices.
Pay through the nose.
A rising tide lifts all boats.
The boat has a leak so pour in more water (krugman)
Don't worry be happy
Where's Portugal?

Wed, 07/09/2014 - 09:18 | 4939080 dontgoforit
dontgoforit's picture

Not too far from Belgium as I recall.

Wed, 07/09/2014 - 09:00 | 4939018 Bangin7GramRocks
Bangin7GramRocks's picture

Why? Three keystrokes and enough fake money to cover the whole crisis will be invented. Now back to your regularly scheduled programming....

Wed, 07/09/2014 - 09:46 | 4939198 disabledvet
disabledvet's picture

Make it a nice car too.

And dress nicely!

We don't just return your 250 million in these here parts to a bunch of nobodies. And you have ask for your money back in a civilized manner. That would mean "would please give me my 250 million dollars back." And then upon receipt of said 250 miliion "do not forget to say thank you. How are the children doing?"

Wed, 07/09/2014 - 08:44 | 4938946 AccreditedEYE
AccreditedEYE's picture

The larger European equity markets don't care. They all gonna rip higher today with U.S.. Strategy: short vol, get long equities, take profit end of week, buy gold. Easy as that.

Wed, 07/09/2014 - 08:44 | 4938947 SafelyGraze
SafelyGraze's picture

bring forward the downward facing dog!


Wed, 07/09/2014 - 08:47 | 4938956 Bernoulli
Bernoulli's picture

Well how did the "kicking the can down the road" strategy work out for Banks in Eurozone periphery?

My guess: ECB stress test will be delayed for "logistical reasons" or they "couldn't hire all the specialists needed" or it's just "too complex".

No way they can seriously perform a stress test in 2014.

Wed, 07/09/2014 - 09:06 | 4939040 Bioscale
Bioscale's picture

And finally they are going to blame the weather, Russia or .. horses.

Wed, 07/09/2014 - 09:16 | 4939071 knukles
knukles's picture

The gentleman who is personally responsible for the stress tests was Al-Gored badly at the Pampalona Running of the Bull Markets due to Global Change the other day and is no longer available.  Only 23 years old but now diagnosed as a paralyzed brain dead quadriplegic, under EU rules, he will remain in his position until 30 years after retirement causing a slight delay in the timeliness of the tests.  In the mean time, a mime form Barcelona and a sword swallower form Paris will stand in temporarily to create estimates while they're on paid vacation in Majorca during the month of August.

What the fuck difference does it make, anyhow?

The number are about as reliable as Chinese statistics.

Wed, 07/09/2014 - 09:20 | 4939088 dontgoforit
dontgoforit's picture

Time for a Portugese-style Cypressing, unless they do a Belgium turn-around.  Must be Wednesday.

Wed, 07/09/2014 - 08:47 | 4938957 Sudden Debt
Sudden Debt's picture

thank god none of that shit is interconnected...

Wed, 07/09/2014 - 08:49 | 4938969 Grande Tetons
Grande Tetons's picture

LOL. Nice. 

Wed, 07/09/2014 - 09:14 | 4939069 A82EBA
A82EBA's picture


Wed, 07/09/2014 - 09:23 | 4939100 pods
pods's picture


Wed, 07/09/2014 - 09:33 | 4939137 dontgoforit
dontgoforit's picture

Anyone going to BTFD on these bonds?  Isn't that what Pappillon's pal (Dustin Hoffman) went to Devil's Island for doing? 

Wed, 07/09/2014 - 10:09 | 4939292 BringOnTheAsteroid
BringOnTheAsteroid's picture

Ring barked more like it.

Wed, 07/09/2014 - 10:22 | 4939355 css1971
css1971's picture

isolated incident.

Wed, 07/09/2014 - 08:48 | 4938958 PlusTic
PlusTic's picture

sounds bullish, buy stokks/sell vix/treasuries!

Wed, 07/09/2014 - 08:49 | 4938960 buzzsaw99
buzzsaw99's picture

moar accounting fraud can fix this

Wed, 07/09/2014 - 08:49 | 4938962 yogibear
yogibear's picture

Can't wait until Japan fails. In the insolvent pecking order the PIIGS are turds they keep spraying with Brussels perfume.

Guess their starting to stink again.

Wed, 07/09/2014 - 09:22 | 4939095 dontgoforit
dontgoforit's picture

WTF we gonna do when we all fail?  Is that the NWO set-up senario?  Faber: "I told you so!!!"

Wed, 07/09/2014 - 08:49 | 4938963 _ConanTheLibert...
_ConanTheLibertarian_'s picture

óh shìt

Wed, 07/09/2014 - 08:50 | 4938966 AdvancingTime
AdvancingTime's picture

Debt does matter no matter what they say.  Modern Monetary Theory often referred to as MMT to its many believers removes much of the risk ahead and guarantees that we will always be able to muddle forward. MMT also known as neochartalism is a economic theory that details the procedures and consequences of using government-issued tokens and our current units of fiat money. 

Newly acquired tools like derivatives and currency swaps are suppose to allow us to print and  manipulate away problems. What I'm seeing develop is an "almost surreal" feeling of indifference towards reality. More on this subject in the article below.


Wed, 07/09/2014 - 09:23 | 4939097 dontgoforit
dontgoforit's picture

Is it year seven yet?  Time for jubilee.

Wed, 07/09/2014 - 08:53 | 4938968 Stoploss
Stoploss's picture



4 years later and still the same shit........


Portugal's Largest Bank Misses Bond Payment; Bonds Collapse, Hilarity Ensues
Wed, 07/09/2014 - 08:53 | 4938985 yogibear
yogibear's picture

They just covered the stench without cleaning the mess. Just like Japan and the US.


The PIIGS are starting to stink again.

Wed, 07/09/2014 - 09:23 | 4939099 dontgoforit
dontgoforit's picture

Long tanker loads of Fabreze

Wed, 07/09/2014 - 09:27 | 4939122 GetZeeGold
GetZeeGold's picture



4 years later and still the same shit........


Yeah.....like I said.....pretend and extend.

Wed, 07/09/2014 - 11:15 | 4939558 Pure Evil
Pure Evil's picture

Too bad there's no Yangtze river to dump the PIIGS into.

Luckily the Atlantic Ocean is available to dump all their Fukushima radiated toilet paper into.

Wed, 07/09/2014 - 08:50 | 4938974 jubber
jubber's picture

Bunds 1.211%

Wed, 07/09/2014 - 09:52 | 4939225 disabledvet
disabledvet's picture

Recovery right around the corner! Long Bezerkers!

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