January 30, 2018 / 12:56 PM / 9 months ago

Banco Popular bondholders ask to join Spanish criminal probe into collapse

MADRID, Jan 30 (Reuters) - Bondholders in failed Banco Popular have asked to join a Spanish criminal investigation into its former top executives and auditor PwC, their law firm said on Tuesday, after the bank’s rescue hit them with a 850-million-euro ($1.05 billion) loss.

European authorities orchestrated a rescue of Spain’s then sixth-biggest lender in early June 2017 which wiped out shareholders and junior bondholders, while Popular was sold for a nominal 1 euro to larger rival Banco Santander.

The Spanish High Court is investigating the role of former Popular chairmen Angel Ron and Emilio Saracho in its collapse following complaints by Popular shareholders. They have denied any wrongdoing.

Santander’s takeover spared Spanish taxpayers from footing the bill and Popular’s savers and activities were not affected but it wiped out a total 1.9 billion euros in subordinated and convertible bonds.

Law firm Quinn Emanuel, which represents the group of bondholders, said the court was looking at allegations of false financial statements, investor fraud, market manipulation, and possible insider trading at Popular.

Quinn Emanuel said the bondholders were registering with the court as “aggrieved parties”, which under Spanish law allows them to participate in the legal process, meaning they can provide and receive information about the case.

It is a relatively common step in Spanish legal cases for such parties to be involved. It could give the bondholders access to the process and to information that could help them with any future civil cases seeking compensation or damages.

“The funds wish to be informed and assist this investigation in any way they can to determine whether there was any foul play,” Quinn Emanuel partner Richard East said in a statement.

The High Court still has to accept the bondholders’ request but it would be unusual to be rejected.

Popular had a stock market valuation of 1.3 billion euros on the day of its bailout.

During Ron’s time as chairman from 2004 to 2017, shares in Popular lost around 95 percent of their value as the bank struggled to rid its books of toxic real estate assets.

Ron’s lawyer was not immediately available to comment on Tuesday. Saracho, who was chairman of Banco Popular when it was rescued, did not reply to an email seeking comment.

A spokesman for PwC, which was auditing Popular when it was rescued, declined to comment.

The group of bondholders formed last year after Popular’s resolution, and includes PIMCO, Anchorage Capital Group, Algebris Investments, Ronit Capital and Cairn Capital. It has also filed an administrative claim against the FROB, Spain’s bank bailout fund.

The Spanish case follows lawsuits filed by bondholders and shareholders in the EU’s Court of Justice for the rescue to be reversed and bonds restored. None of the lawsuits have been resolved. ($1 = 0.8075 euros) (Reporting by Jesús Aguado; Editing by Angus Berwick and Alison Williams)

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