Banco Espirito Santo's collapse came after it unveiled losses on loans made to an assortment of companies run by its founding family. The broader Espirito Santo group, which included tourism, health and agriculture companies, sought bankruptcy protection and began liquidating last year. Portuguese prosecutors have since launched an investigation into the company's collapse. New management put in place at Banco Espirito Santo by the central bank has said they suspect the lender engaged in illegal behavior.
Goldman officials believed that the Oak Finance loan would be protected in the new structure, in part because a senior Bank of Portugal official said so in writing, Goldman spokeswoman Fiona Laffan said. But on Dec. 23, Novo Banco said in a regulatory filing that the Bank of Portugal decided not to transfer the Goldman-backed loan to the new entity.
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As a result, the prospects of Goldman and its clients being repaid have dimmed and Goldman's finance staff had to write down the value of the loan.
It could not be learned how much of the $835 million loan came directly from Goldman Sachs, how big the writedown was, or how much bonuses would be affected. Laffan declined to provide those details, as did other sources who requested anonymity because they were not authorized to discuss the matter publicly.
It's not clear who at Goldman Sachs had chief responsibility for originating and structuring the loan to Banco Espirito Santo, though such a commitment typically has to move through the firmwide capital committee, which includes senior executives like Chief Financial Officer Harvey Schwartz and Chief Risk Officer Craig Broderick.
Those involved with the loan at Goldman came from the securities division, as well as the financing group, which sits within the investment banking division. The securities business is overseen by co-heads Isabelle Ealet, Pablo Salame and Ashok Varadhan, while the financing business is overseen by co-heads Jim Esposito and Marc Nachmann.
Vice Chairman Michael Sherwood and Co-Head of Investment Banking Richard Gnodde, who together run Goldman Sachs International, were also apprised of developments regarding the Banco Espirito Santo loan.