Pharol, the groovy new name for the once proud Portugal Telecom, appears to lack the Midas touch as its shares sink another 6% to an almost unbelievable historic low of 13.6 cents.
Pharol is listed in the PSI-20 worst performers so far this year as it has managed to lose its shareholders 48.7% of their investment since Jan 1st.
Standard & Poor’s downwards re-rating of Brazilian telecoms company Oi (Pharol owns 27.5% of Oi) did not help matters with Pharol’s shares falling for the fifth consecutive day’s trading.
S&P released a report today cutting Oi rating from B+ to CCC which is deep in garbage territory, commenting, "Oi recently announced that it has hired PJT Partners as financial advisor to help evaluate strategic and financial alternatives to optimise its liquidity and debt profile. We believe that the Oi strategy to reduce its debt will probably involve an exchange of debt at a discount level, given the high level of leverage and low market prices for bonds."
This is the third time since February 15 that the S&P has downgraded the Brazilian telecoms operator but it is in good company as Fitch and Moody's are of the same opinion that Oi’s plan lacks credibility.
The old PT was of course the company whose board saw fit to lend Grupo Espírito Santo’s property subsidiary Rioforte €900 million of shareholders’ cash which was never repaid. Director Henrique Granadeiro resigned from the board of Portugal Telecom in August 2014 saying that he always had acted "in the best interest of PT, its employees and all its shareholders."
Zeinal Abedin Mohamed Bava was Chief Executive Officer of Oi until October 7th 2014 when he resigned. He formerly had been on the board of PT at the time of the loan which he later said he knew nothing about.
Bava was moved sideways from PT to Oi in Brazil until rather generously paid off with €5.4 million of shareholders' money.
In January 2016 these former directors heard that they are being sued by Pharol, as are the former PT auditors Deloitte and former directors Luís Pacheco de Melo and Amílcar Pires.
Pharol informed the market regulator CMVM that it formally has lodged a petition at the Judicial Court of the District of Lisbon for damages against Deloitte due to the failed investments in Rioforte.
Deloitte, as PT’s former auditor, is accused of “violation of contractual duties due to the losses made on investments in debt instruments issued by companies within the Espírito Santo Group.”
The directors are being sued for lending and losing around €900 million.
