Bank of Valletta has announced that it has settled a massive €363 million claim by bondholders of a defunct Italian shipping company for €182.5 million without admitting any liability on its part.
The news comes while the bank was appealing the forfeiture of a €363 million precautionary security last December, when it engaged with the curators of the bankruptcy of the Deiulemar group, to look into reaching an out of court resolution to the dispute.
“The Bank can announce that after lengthy and detailed discussions with legal representatives of the Deiulemar bankruptcy, including some 13,000 bondholders, an out of court settlement agreement has been reached, without any admission of fault, which will bring all legal claims surrounding this issue to an end.,” the bank said in a statement on Wednesday.
Explaining the settlement, BOV said that it had agreed to pay a full and final settlement in the sum of €182.5m in respect of the €370m judgement handed down by the Court of First Instance in Torre Annunziata.
“This will extinguish all claims from either side and BOV will have no further ongoing contingent or actual liability, and c.€370m of collateral previously posted will be returned directly to BOV,” the Bank said.
“Given existing provisions held against this potential liability, BOV will incorporate an additional one-off charge into its profit and loss results this year in the region of €100m,” the Bank continued.
The Bank said that it has an extremely strong capital position and continues to meet all regulatory requirements when assimilating the impact of this settlement agreement. The removal of uncertainty further increases confidence in the Bank’s longer-term sustainability, BOV added.
“Legal agreements are being finalised and settlement under this agreement will take place in the coming days, bringing about closure to this long outstanding position, which has been in litigation since 2014,” BOV said.
BOV’s Chairman Gordon Cordina commented “The Deiulemar situation has been a long and complicated one for the Bank. The Board has had to make a very difficult decision to approve the settlement amount, after it was decided it would be in the best interests of the Bank to bring this matter to a close. The Bank will henceforth be in a more secure capital position overall and better placed to move forward with confidence and sustainability. The legal representatives for the Deiulemar bankruptcy, which includes some 13,000 bondholders as creditors have been willing to accept our approach and agree on a settlement, notwithstanding that they had a judgement in their favour of double that amount.”
BOV said that this decision was taken by the Board collectively and unanimously after having reviewed and considered legal opinions from several leading authorities in both Italy and Malta. This was also supported by detailed risk assessments of the various options open to the Bank and the potential outcomes that may result under each scenario.
“Notwithstanding the consistently expressed legal views that this case had no merit, a view which still prevails, the ruling in the Court of First Instance in Torre Annunziata has proven that the case may receive a different interpretation in the environment local to the Deiulemar bondholders, and altogether hostile to the Bank,” the bank said in its statement.
“The Board considered the very real risks that such a ruling may, notwithstanding the purely legal position, be endorsed by a subsequent Naples-based appeal court. Were this eventuality to arise, the possible options open to the Bank were limited and would potentially extend the uncertainty for 10 years or more. The settlement amount reflects the risks of these possible outcomes from all sides and the Board evaluated that this option represented the best way forward,” it added.
The Bank said that it has informed its regulators whom we also believe take comfort that this source of risk has been removed, and greater certainty in respect of future capital levels have been restored.
The claim for €363 million was being made by some 13,000 bondholders of Deiulemar Group. An offer to settle for €50 million was rejected late last year.
The case began after liquidators of the Deiulemar group, together with representatives of 13,000 Italian bondholders filed a court application against BOV after they lost their life-savings.
In 2009 BOV had allegedly taken over a trust that held €363 in assets of the shipping company, which went bankrupt in 2012. In 2014 a number of members of the founding families of the shipping company were jailed for illegal financial transactions. When the shipping company went bankrupt, the bondholders who lost their lifesavings turned to the Maltese bank.