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Placed in the ‘bad bank’: Quinn Emanuel, Akin Gump and Bird & Bird lead on $835m Espirito loan dispute

Quinn Emanuel Urquhart & Sullivan, Akin Gump Strauss Hauer & Feld and Bird & Bird have been gifted lead instructions in two separate suits by Goldman Sachs and a group of investors on an $835m loan repayment dispute taken against Pinsent Masons’ client Portuguese bank Novo Banco at London’s High Court.

Quinn Emanuel’s London co-managing partner Richard East and Akin Gump restructuring specialist James Roome have been instructed on the first investor/lender suit, while local counsel is being provided by PLMJ’s head of banking and finance Hugh Rosa Ferreira. Meanwhile, Bird & Bird’s London disputes head Steven Baker was selected by Goldman Sachs to represent the investment bank in the second case.

Pinsent Masons is representing Novo Banco in the dispute with a team including partner Stuart McNeill and national head of banking and finance litigation Michael Isaacs.

The disputes relate to a special purpose vehicle, Oak Finance Luxembourg, which was created by Goldman Sachs to raise funds for Banco Espirito Santo (BES), a Portuguese bank based in Lisbon, for the purpose of financing an oil refinery in Venezuela.

However, in August 2014, Portugal’s central bank announced a €4.4bn bailout of BES that brought about its split into two banks: Novo Banco, which kept healthy operations, and a remaining ‘bad bank’ to keep toxic assets. As a result creditors, including the claimants whose loans were not transferred to the healthy bank, are expected to face significant losses and the loan unlikely to be repaid.

The first suit, which comprises 12 claimants including businessman Paul Singer’s hedge fund Elliott International, argues that the Bank of Portugal’s subsequent decision in December 2014 not to transfer the Oak Finance loan to Novo Banco was ‘based on incomplete and inaccurate information’.

It further added: ‘The Oak Finance investors do not accept that the Bank of Portugal had any legal grounds justifying the December 2014 decision. Although the Bank of Portugal has since been provided with facts that would require it to reverse its December decision, the Bank has refused to do so, instead referring these matters to be determined by a court.’

Damages claimed in the first suit between all 12 claimants total around $613m. Details about the Goldman Sachs suit have not yet been released by the London court.

Firms which last year landed high profile instructions on the break-up of the troubled Portuguese lender included Linklaters and Allen & Overy, with the former acting for BES and Novo Banco and the latter instructed by the central bank.