After the dismal results of Portugal's Banco Espirito Santo Q2 Earnings report.
"Portuguese authorities are considering creating a bad bank in a recapitalization plan to save Banco Espírito Santo SA, according to people familiar with the matter, as the country's No. 2 lender attempts to deal with astorm involving its parent company.
Under the plan, which could be announced late Sunday, the bad bank is expected to keep all of the lender's toxic assets, including the loans it provided to the troubled parent, Espirito Santo International SA, that could be worthless, according to these people. Current shareholders will remain owners of the bad bank.
The good bank, meanwhile, with all the deposits and other healthy assets, will receive a capital injection with part of a credit line set aside under Portugal's 2011 bailout program, these people said. The European Union and the International Monetary Fund lent €78 billion ($105 billion) under the three-year program that ended in May. Part of the loan—€12 billion—was set aside to help capitalize banks in case of need. More than €6 billion of that money is left.
It isn't clear how much of that money will be used for Banco Espírito Santo".
