Report of the Audit Committee of PT management razed in July … – Reuters

                 

                         
                     

                         

                 

 
                         

A report of the Audit Committee of Portugal Telecom (PT) July devastates the financial strategy of the operator with emphasis on recent years and ranks the reckless and misleading. At stake are cash investments in deposits and bonds of short-term debt, whose concentration ranged in companies of GES, compared to the total available between 70.91% in 2011 and 98.6% in April 2014, which contradicts what was guaranteed market reports and accounts: “To mitigate the credit risks” PT “diversified” their investments “with different financial institutions” with “reputation in the market or taking into consideration the respective credit rating . “

                     

                         Reading the records of applications of PT in the business world the Espírito Santo Group (GES), which arise through the bank, reveal how the operator and the two CEOs, Zeinal Bava and Henrique Grenadier, were being “captured” over time the interests of its largest shareholder: BES (owner of 10% of the company). The situation was accentuated by the financial and economic crisis and is censored, albeit a posteriori, in an internal audit report, produced in the acute phase of the crisis GES. And when it became public that the companies in the universe of its reference shareholder, financed by PT, were insolvent.

In a July 10, 2014 report on the application of excess cash in the GES, the Audit Commission reveals that the July 3, after the Express published the investment of 897 million in commercial paper of Rioforte, called for “a summary of the historical evolution of the balances of investments” in the period between 2001 and 2014

The conclusion is as follows:. “the application of surplus cash in term deposits and debt securities short in companies of GES, particularly in Espirito Santo International-ESI [holding the top of the GES], has always been high, both in absolute and relative terms, varying from a minimum of about 36.8% (in July 2008) and a maximum of 98.6% in April 2014. “

After between 2001 and 2007 were generally between 600 million and a minimum of 144.4 million, exposure to GES shot. From 2008, with 36.8%, upward trend that began in August 2010 reached to 81.5% in deposits in the BES.

After the sale of Vivo, which allowed PT fit of EUR 4.5 billion (which amount apportioned between CGD and BES, both shareholders), Zeinal Bava began increasingly to support its largest investor: the September 30, 2010, the operator had applied in the sphere of the GES 3118 EUR million (including 2240 million Vivo), which translated into 50.9% of the total available. And for the first time, will invest (250 million) in debt securities of companies of GES, in this case the ESI, which will continue until January 2014 (before transferring the money to purchase commercial paper of Rioforte).

After a decrease resulting from the purchase of HI in October 2011, PT returned to trust the bulk of its assets to the group then headed by Ricardo Salgado: 3065 million, ie 79.91% of total. From 2012 “we are witnessing an increased concentration” GES now 85.9%, approaching in May 2014 of 100% (98.35%). Of EUR 1 643 million in question, 897 million earmarked for the purchase of commercial paper of Rioforte).

In terms of CEOs of PT (Zeinal Bava from April 2008 to June 2013, when he assumed the functions in HI, and Henry Grenadier, below, as well as the financial manager, Pacheco de Melo), investment decisions will deserve the audit committee’s comment: “the applications [in GES], especially relating to debt securities, did not comply with the prudential requirements of a risk management disclosed in accountability documents either on diversification both the nature of the counterparties, because they were not made as a financial holding company, whose good reputation in the market not he was shown. “Remember that neither ESI nor have Rioforte rating, and your financial problems are the public domain since September last year (from 18.09.2013 PUBLIC).

Or is, Bava, Grenadier and Pacheco de Melo (as a financial administrator) bucked one of the elementary rules of good management, asset diversification, and “concealed” its decisions applying the treasury market and the CMVM. The management reports and accounts and corporate governance (both approved by the board of directors unanimously PT) wrote: “In order to mitigate credit risk, the policy of PT is to invest in short-term investments, along diversified financial institutions with reputation in the market or taking into consideration their credit rating. “And explain that” the risks related to treasury activities result mainly from investments made by the Group in monetary claims. “