Trade Alert - August 2014, Issue 8


Various Espirito Santo Group entities have now applied, and been admitted to, “controlled management” (gestion contrôlée) under Luxembourg law (see table below for dates of admission).  These entities include: Espirito Santo Financial Group S.A., Espirito Santo International S.A., Rio Forte Investments S.A. and Espírito Santo Financière S.A

This alert sets out some of the key issues to be aware of when acquiring debt in these entities (or other Luxembourg companies).


Q.1   What is the recommended process to transfer a debt of a company in Gestion Contrôlée? We would recommend using an LMA English law Trade Confirmation (Claims) and Luxembourg law LMA Assignment Agreement (Distressed/Claims) for transactions which settle on or after the date of request for Gestion Contrôlée.

Q.2   What risks should be covered in the LMA documentation mentioned in Q.1? The trade documentation should include provisions to cover: (i) the transfer of all claims ancillary to the debt traded (e.g. claims relating to fraud, misselling etc), (ii) claw-back risks, (iii) assistance of the original seller in respect of the filing of the claims, and (iv) fulsome representations and warranties (as these are likely to be requested by any onward purchaser).

Q.3   What are the considerations for bond holders if the Gestion Contrôlée process develops into a bankruptcy process? Under a Luxembourg law bankruptcy process there is a requirement for creditors to file claims against the debtor. The "creditor of record" for Luxembourg law purposes will depend on the form and nature of the applicable debt instrument. Noteholders may consider definitising their Notes to ensure that they are the creditor of record for filing purposes.



Date of request

Date admitted

Espirito Santo International S.A.

18 July 2014

22 July 2014

Rio Forte Investments S.A.

22 July 2014

29 July 2014

Espirito Santo Financial Group S.A.

24 July 2014

29 July 2014

ESFIL - Espírito Santo Financière S.A.

31 July 2014

5 August 2014







General Overview

Banking licence requirements: No banking licence required to acquire funded term debt.  However, the granting of loans by a credit institution located in Luxembourg, which receives deposits and other repayable funds from the public and grants credit for its own account, requires a banking licence.

Tax: Generally, no Luxembourg withholding tax will be payable. However, there are two particular exceptions that should be noted:

(i)     Payments of interest on a loan may be subject to withholding tax if the structure is in the form of a bond with a profit-contingent coupon (or similar).

(ii)    35% withholding tax may apply, unless the beneficiary of the payment (the paying agent) elects to exchange information required under the EU Savings Directive.  From 1 January 2015, Luxembourg will no longer apply such withholding tax and information will be automatically exchanged.

No capital gains tax/stamp duty will be payable on the transfer or amendment of a loan.

Transfers of loans: May be made by assignment or novation. Assignment will only be enforceable against the debtor upon notification to and/or acceptance by the debtor. Novation will require the consent of all parties.

Security: The most common form of security granted over receivables and financial instruments under Luxembourg law is a pledge. However, transfers of ownership for collateral purposes and repurchase agreements may also be used.

Under Luxembourg law, a security interest is viewed as an ‘accessory’ right, which is attached to the secured claim and will automatically pass upon a transfer by assignment of such claim.  When the secured claim is novated, the accessory security interest will not remain effective, unless it is expressly reserved.

Trusts: Trusts are recognised but do not exist under Luxembourg law.  The law chosen by the parties will in principle be recognised as governing law, and the effects of the trust (in particular, the segregation of trust assets) will be recognised, subject to exceptions, including: (i) the non-recognition of the chosen governing law if the situation has a closer link with another jurisdiction which does not recognise trusts, (ii) the application of mandatory laws of Luxembourg and other jurisdictions, and (iii) the general public order exception.

On this basis, we would advise transferring by way of assignment as opposed to novation.

Post Transfer Requirements: There are no mandatory registration requirements. However, the registration of the loan documents with the Administration de l’Enregistrement et des Domaines in Luxembourg may be required in the case of legal proceedings before Luxembourg courts or if the loan documents are required to be produced before an official Luxembourg authority (autorité constituée). In case of such registration, or in case of voluntary registration, a nominal registration duty or an ad valorem duty may be payable.

Financial collateral arrangements are subject to nominal registration duty only.

Equitable subordination: There is no concept of equitable subordination under Luxembourg law.


Thank you to Luxembourg counsel who assisted us with this Trade Alert.



Charlotte Murray-Kohter

+44 (0) 20 7170 8679

Charlotte Murray-Kohter is a Paralegal in Cadwalader's Financial Restructuring Department working on debt and claims trading in the secondary market.  Prior to joining Cadwalader, Charlotte obtained a Bachelor’s degree in English law and attended BPP Law School, London to complete the Legal Practice Course and a Master’s degree.


BES Update 

Espirito Santo Group Entities which have filed under the Portuguese Corporate Insolvency and Recovery Code


Date admitted

Filing deadline

Espírito Santo Irmãos S.G.P.S., S.A.

29 July 2014

19 August 2014

Espírito Santo Financial (Portugal) S.G.P.S., S.A.

1 August 2014

1 September 2014


For Espírito Santo Group queries:

Alexis Kay
Associate, London
T.+44 (0) 20 7170 8520



For BES trading queries:

Louisa Watt
Partner, London
T.+44 (0) 20 7170 8678


August Update

  1.  Cyprus fixed term deposits: On 30 July 2014 Bank of Cyprus confirmed it would release the final EUR 927m (USD 1.3bn) tranche of 12-month fixed term deposits which matured on 31 July 2014. One third was immediately released, one third was converted into three-month fixed term deposits, and one third was converted into six-month fixed term deposits. As the second EUR 933m (USD 1.3bn) tranche which matured on 30 April 2014 was similarly split the remaining deposits will now mature and will be automatically released (subject to Cyprus capital controls) as follows: (i) EUR 309m three-month fixed term deposits on 30 October 2014, (ii) EUR 311m six-month fixed term deposits on 31 October 2014 and (iii) EUR 309m six-month fixed term deposits on 30 January 2015
  2. Cyprus “Open Offer” share subscription: Following the Bank of Cyprus’ successful placing of EUR 1bn new shares on 28 July 2014 as part of its restructuring plan, the Bank proceeded with its offer to existing shareholders to subscribe for up to 20% of the new shares (over a period of 15 business days ending on 21 August 2014) at the same price as the placing price of EUR 0.24 per share. The closing of this “Open Offer” is subject to the passing of shareholders resolutions at an EGM of the Bank’s shareholders (held on 28 August 2014) which is required to approve and implement the capital raising. The new shares will be unlisted but the Bank's intention is to list on the Cyprus Stock Exchange and Athens Stock Exchange before the end of 2014.
  3. Apcoa Parking announced on 20 August 2014 that it has reached agreement with its sponsor, Eurazeo SA and 95% of its lenders, to the terms of its financial restructuring.  Pursuant to the terms of the deal, lenders will take control of the company, its debt will be reduced by more than EUR 440m and extended for six years and EUR 90m of additional funding will be provided by Deutsche Bank AG.  The restructuring will be implemented through a scheme of arrangement (following a change in the governing law of the loan from German to English law) and is expected to conclude during October 2014.


This publication is for general purposes and does not provided comprehensive or full legal advice.  It is based upon public information available at the time of publication and is subject to change.  Cadwalader, Wickersham & Taft LLP does not accept any responsibility for losses that may arise from reliance upon information contained in this update.  This publication is intended to give an indication of legal issues upon which you may need advice.  The contents of this update may not be relied upon as accurate or sufficient and full legal advice should be taken in relation to specific trading situations.

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