The Berardo Foundation has debts of €998 million as at the end of 2016. Almost all are medium to long-term bank borrowings.
The founder of the Foundation, Joe Berardo, holds 862 works of modern and contemporary art in a collection valued by Christie's at €316 million in 2007, rising to around €400 million today. This is the collection on display at the Museu Coleção Berardo in Belém, Lisbon.
The Foundation’s interest payments for 2016 exceeded €17 million.
In July this year, Caixa Geral de Depósitos, BCP and Novo Banco decided that Joe Berardo was unlikely to be able repay his bank borrowings and started legal proceedings to seize 75% of the Berardo Foundation’s collection of modern art which, the banks claim, had been pledged as collateral.
This was when the fun started as Berardo says the art is owned by the foundation, (Fundação de Arte Moderna e Contemporânea - Colecção Berardo) which is a separate legal entity and can not have its assets seized to pay off his debts.
From the 2016 annual report of the Foundation’s activities, the €17 million in interest on €998 million in loans shows the finances of the Foundation and of the businessman are inexorably linked.
A court is deciding whether or not the art is owned by the man, or by the Foundation with the banks, keen to avoid acute bouts of embarrassment, saying they are keen to reach an out-of-court agreement.
Joe Berardo borrowed €500 million from three banks to enable him to buy a 7% stake in BCP in 2007 but now his borrowings far exceed this amount which seems to have been lent with little or no collateral.
The businessman’s borrowings are mind-boggling with Caixa Geral, (€400 million,) BCP (€400 million,) Novo Banco (€200 million) and Santander Totta (€100 million) all keen to be repaid.
The questionable collateral is unevenly secured with 40% pledged to Caixa Geral, 40% to BCP and 20% to Novo Banco leaving Santander Totta facing a 100% loss on its loan.
Berardo is said to have borrowed €1.1 billion for ‘stock exchange operations.’ Share values collapsed in the 2008 financial crisis and his losses were massive.
How the charitable foundation has ended up with nearly a billion euros in bank borrowings remains to be explained but if this non-for-profit organisation has taken over Joe Berardo’s loans, it may well be forced to sell the artwork, probably signalling an end to the hugely popular collection in Belém, housed in a building that partly was paid for by taxpayers.
