30 June 2014 by HCM
It is nice to sit on an €8bln cash pile. But with interest rates at record low levels, if you want to earn a little something out of it, you cannot leave it on your bank account. This is probably what PORTEL’s (Portugal Telecom SGPS SA) treasurer had in mind when he invested €900m in Rioforte Commercial Paper, which is one of the holding companies in the Espirito Santo group. Over the last few weeks, rumours have been flying regarding Espirito Santo International, which owns Rioforte and which was said to be in financial difficulties and to present financial irregularities. Since the middle of last week, changes to the board of Banco Espirito Santo have brought even more question marks regarding the group. It looked inevitable that at some stage investors would start asking question about PORTEL’s investments. This examination begun on Friday and PORTEL’s 5 year CDS was marked 20bps wider. It continued today with another 25bps widening. PORTEL was upgraded to investment grade by the rating agencies as recently as last week, so this widening might be seen as an investment opportunities, but no one wants to catch a falling knife.