11:05, June 29 415 0

2017-06-29 11:05:06
Quinn Emanuel to act on group claim over Banco Popular £1 sale

Quinn Emanuel Urquhart & Sullivan has been chosen to represent a number of Banco Popular bondholders who lost shares when the struggling bank was sold to Santander for just £1 last month.

Pimco, Anchorage, Algebris and Ronit Capital are among the bondholders who effectively had their shares extinguished when, in a landmark decision,the Single Resolution Board imposed a resolution scheme on the bank following the European Central Bank’s determination that it was “failing, or likely to fail”.

The ECB’s diagnosis triggered the record-low sale on 6 June, meaning equity and junior bonds have been written off

Quinn Emanuel will look into the actions and communication from regulators that led to the ECB’s assessment, including the causes of insufficient liquidity.

It will also investigate actions and communication from bank management that meant a resolution from the private sector could not be found, as well as the regulatory appraisal that led to decision-making that resulted in the resolution outcome and the full writedown of capital instruments, which the firm said was “unjustified”.

Lead partner Richard East said: “We are delighted to be chosen to represent these funds, all of whom have suffered disproportionate and unnecessary losses as a result of the implementation of the SRB’s decision to impose a resolution scheme on Banco Popular and its subsequent implementation by the Spanish domestic regulator, the FROB. A number of serious issues have already emerged and we will be reviewing the resolution scheme and the events leading up to the decisions taken and, where necessary, bribing claims to restore the position and/or seek damages.

“We strongly encourtage similarly affected stakeholders including AT1/LT1 holders to contact Quinn Emanuel and join the group in taking this action.”

It is thought that Boies Schiller & Flexner was also contacted by hedge funds wishing to recover losses.

One source said that junior bond holders had suffered a loss of around €2bn.

The judgment reached by the Spanish domestic regulator (FROB), read: “The resolution scheme adopted by the SRB aims to fulfil the principles and objectives underlying all resolution procedures. To begin with, the new regulatory framework is founded on the idea that the shareholders and creditors of an entity under resolution must be the first to bear losses in accordance with the order of priority of claims laid down in insolvency law, with the legally established exemptions … The aim, therefore, is to minimise the effects of an entity’s resolution on taxpayers, and ensure shareholders and creditors bear an appropriate share of the costs of the resolution.

“Consequently, holders of Banco Popular shares, holders of Additional Tier 1 capital instruments and holders of Tier 2 capital instruments must bear the losses incurred by the entity and revealed by the entity’s negative economic value as well as by the price offered in the implementation of the sale of business tool, through a non-discriminatory, transparent and open tender process.

“Given that the economic value of Banco Popular has been found to be negative, and this has been confirmed by the price resulting from the sale of the entity as a resolution tool, it is necessary to adopt, as a first resolution, the reduction of the entity’s share capital to zero by writing down the shares currently outstanding.”