LONDON, March 6 (IFR) - Former shareholders in Banco Popular, which was sold for €1 to Santander last June after being put into resolution, have opened up two fresh fronts in their battle to seek compensation for their losses.
A group, led by Mexican billionaire Antonio del Valle, the Spanish lender’s biggest investor, filed an application on Monday in the US federal district court for the Southern District of New York asking Santander to reveal information regarding its purchase of Banco Popular.
As part of this, the investors have also filed a letter of January 22 to Spain’s prime minister Mariano Rajoy outlining their claims against the country under the 2006 bilateral investment treaty it has with Mexico.
They say Spain’s actions, through its bank rescue fund FROB, in resolving Banco Popular without considering other options, such as a capital raising or a less distressed sale, was arbitrary and meant the investors lost €470m.
“While purporting to carry out a competitive bidding process, Spain, in reality, carried out a fire sale through a sham auction that it conducted so as to ensure a pre-determined outcome with Santander as the only bidder,” said the letter to Rajoy.
Banco Popular was advanced in its own efforts to raise capital from existing or potential new shareholders. The Mexican group had been approached about a possible rights issue prior to the Santander sale, and Deutsche Bank and Barclays had said they would underwrite a fundraising.
The investors also say the Bank of Spain’s decision to deny Banco Popular a further €6bn of emergency liquidity facilities, which could have tided over the lender until fresh capital was injected, was also damaging to shareholders and other investors.
“Despite Banco Popular’s requests for emergency liquidity assistance to calm the panic and stabilise its liquidity position, Spain initially denied liquidity assistance altogether, and then granted only about a third of what Banco Popular had requested to overcome the ongoing run on the bank,” said the New York court filing.
Javier Rubinstein, partner at law firm Kirkland & Ellis that is representing the Mexican investor group, said Spain had violated its treaty obligations to provide “fair and equitable treatment, a stable and predictable legal and regulatory environment, protection against arbitrary and non-transparent measures ... and against unlawful expropriation.”
The group says the information from Santander about how it was able to value Banco Popular prior to its offer, and what it was told by Spanish authorities about the bank’s liquidity position, will also support its actions against the European Commission and Single Resolution Board.
That separate filing was made at the European Court of Justice on August 4 last year.
“Santander, as the acquirer and sole owner of Banco Popular, was an active and central participant in the resolution process and therefore is in possession of documents and information highly relevant to understanding the basis on which the resolution was ordered,” said Rubinstein.
Under international arbitration an initial six months is given to agree a solution before next steps are taken to resolve the situation at a tribunal. Spain is not expected to respond until the end of this initial period on July 21.
Bondholders, including Anchorage Capital, Algebris Investments and Ronit Capital, have also filed lawsuits against the European authorities and are seeking more information on Banco Popular’s request for emergency liquidity assistance from the Bank of Spain and European Central Bank two days before it was resolved.
Santander and the Spanish government couldn’t immediately be reached for comment. (Reporting by Christopher Spink)