António Pedro Santos / Lusa
Luís Filipe Vieira, former president of Benfica
The Supreme Court considered that the bank knowingly assumed the risk of losing the money by financing Vieira’s companies through mandatory convertible securities.
The Supreme Court of Justice gave reason to two companies owned by Luís Filipe Vieira in the legal dispute they had with Novo Banco. The bank will now become the majority shareholder of Inland and Promovalor II, following the conversion of 160 million euros in financing.
At issue were mandatorily convertible securities (VMOC) contracted in 2011 with the then Banco Espírito Santo (BES). These financial instruments provide that, if there is no reimbursement within the agreed period, the credit automatically converts into capitalwith the creditor bank becoming a shareholder in the issuing companies. After the resolution of BES, in 2014, the rights passed to Novo Banco.
The conversion took place in 2021, 10 years after the issuance of the VMOC, when companies no longer had relevant assets and had negative equity. Novo Banco challenged this conversion in court, alleging bad faith, abuse of rights and anomalous change in circumstances, arguing that it could not be forced to become a shareholder in companies with no economic value.
However, the Supreme Court rejected these arguments. In the decision, dated February 10, the judges consider that the risk of default or insolvency of issuing companies is inherent to the nature of VMOC. As the bank is a qualified professional entity, the court understands that it assumed the business risks in a conscious and informed manner, says the .
This is Novo Banco’s third judicial defeat in the case, following unfavorable decisions at first instance and at the Lisbon Court of Appeal. With the final judgment, the conversion remains valid and the bank now holds 66% to Promovalor II and 62% to Inland.
The two companies, which were part of Vieira’s business universe, were left without assets after the transfer of their real estate and tourist assets to an investment fund, whose management did not generate the expected results. In 2023, Promovalor II had a negative net worth of 198 million euros, while Inland had a deficit of 72 million.
