Rioforte is to appeal the decision made by the Commercial Court of Luxembourg that the BES Group subsidiary was to be liquidated and the resulting funds used to pay off its creditors.
Grupo Espitíto Santo hoped that Rioforte could continue under creditor protection but on October 17 the Luxembourg authorities rejected its application for controlled management.
Rioforte is not without assets as it owns the Tivoli hotel business, Herdade de Comporta the 12,500 hectare development on the Tróia peninsular and projects in Brazil, Mozambique and Paraguay.
Espírito Santo Group has decided to challenge the Luxembourg ruling on behalf of Rioforte and appeal for more time in which to sell the assets of Rioforte to ensure the long list of creditors is not disadvantaged by the fire sale of Rioforte’s businesses in a ‘disorderly bankruptcy’ as the appellants have put it.
"Rioforte Investments SA has decided to appeal the decision of the Tribunal of Commerce of Luxembourg 17 days ago which rejected the request for a 'Gestion Contrôlée'” reads a company statement.
Rioforte’s management, led by João Pena, believes that controlled management, which protects it from lawsuits, in a "better and higher way serves the interests of all creditors who will receive more money from a programme of sales and debt restructuring."
The insolvency pathway decreed by Luxembourg judge Anick Wolff simply is not viewed by Rioforte as the best solution and Rioforte’s management wants to be involved in the various asset sales.
This desire to be involved in the sell off does not make a compelling case for overturning the Luxembourg court’s decision. Rioforte’s directors claim that as the company has activities in South America, Africa and Europe they represent a safe pair of hands when dealing with the various management teams in far flung places.
The decision to appoint someone else to handle the sell off of assets is the right one according to the Luxembourg court and by having a top accountancy firm’s insolvency and disposals team handling the job at least there will be no accusations of backhanders and dodgy dealings at a company that is deeply tainted with the stains left behind by its owner, BES Group.
Rioforte management may feel that the €900 million it owes to Portugal Telecom somehow is the fault of Ricardo Salgado rather than that of the remaining Rioforte management yet the debt was a damaging one when the Luxembourg court was debating its decision.
Indeed, it was this massive debt that convinced the Luxembourg court that the best route for Rioforte creditors is to wind the whole thing up even though Espírito Santo Health had been sold for €244 million, and Espírito Santo Travel had been offloaded to the Swiss, reducing the overall debt but not by enough to make much of a difference.
Part of Rioforte’s plan was to enter controlled management and convert 75% of its debt to equity, leaving Portugal Telecom with 33% of the reconstructed company.
PT would prefer its cash back and has been punished enough by the stock market which has discounted its shares as if the €900 million owed by Rioforte will never be seen again, and it is probably right.
