Banks order to execute the Berardo Collection – The Economic Journal

The entire Berardo collection risks being pawned off by Joe Berardo's top creditors. Caixa Geral de Depósitos, BCP and Novo Banco want to recover credits of around 1 billion euros through the execution of pledges of the Berardo Collection Association (ACB), which owns the works of art that were ceded to the State. These are the movable assets of Joe Berardo signaled by the banks to pawn in the lawsuit that advanced in the end of April against the businessman, joining efforts to execute the debt of the Madeiran businessman that amounts to 962 million euros. A joint initiative that takes place after the beginning of the year has failed to settle the loan.

The Economic Journal found that CGD, BCP and Novo Banco presented "strong" executive titles in the summary executive action filed at the Judicial Court of the District of Lisbon on April 20, which included the titles of the Berardo Collection Association were given as pledges (real guarantees) of credits to Joe Berardo for the purchase of shares. At stake are the guarantor provided by the businessman to the banks of 75% of the titles of the owner of the art collection exhibited at the Centro Cultural de Belém (CCB), in a percentage that reached 100% after the first guarantee reinforcements when Berardo again failed to fulfill its obligations.

At the banks' attention are the ACB titles that have associated a value referring to the art collection of the entrepreneur, whose initial collection of 862 works was evaluated more than a decade ago in 316 million euros by the international auctioneer Christie's, in the year of constitution of the Foundation of Modern and Contemporary Art. The agreement between the Government and Joe Berardo provides for the maintenance of the State's preemptive right in the event of a decision to sell the collection. A collection that will continue in the CCB until at least 2022 (with automatic renewal) and that, according to experts of the sector, should be worth more than 500 million euros today.

It remains to be seen whether the partial (or partial) liquidation of the debt will go through the sale of the collection or to dispossess Joe Berardo of ACB's securities, with its legal sale, which will allow the collection itself to be bought in a process that will always require the participation of the State while in force the lending agreement that gives the State the right to purchase option Berardo Collection.

Attachment will require agreement with State

It is recalled that these collateral of the ACB were given as an additional guarantee of Joe Berardo, after the financial crisis and the difficulty of recovery of the markets. These loans were tied to the purchase of shares which, however, had been heavily depreciated and did not recover. This was the case of BCP's debt portfolio, which, as of 2008, began to depreciate continuously, at a time when Caixa Geral de Depósitos knew that its client Joe Berardo faced difficulties in liquidating the debts that totaled close to 348 million euros – credits contracted between July 14, 2006 and May 28, 2007, and served in large part to finance the investor in the fight against Jardim Gonçalves for the control of BCP.

The Economic Journal questioned Joe Berardo about the pledges of the ACB bonds that were given as guarantees to the banks, and the Madeira businessman refused to give any clarification. "I can not talk about the process," he said.

On the assets that were flagged for attachment in the lawsuit, the three banks declined to comment on the matter to the Economic Journal.

Judicial action advances after failed attempt of agreement

Three creditor banks called for Berardo's collection in exchange for debt forgiveness. The businessman will have refused and intended to sell the most expensive, delivering only the least valuable.

Following the financial crisis and Joe Berardo's default, CGD, BCP and Novo Banco ended up giving instructions to execute the collaterals (about 40% charged to Caixa and BCP each, and about 20% to the New Bank). including 75% of Berardo Collection Association titles, as reported by the newspaper Público in its edition of July 12, 2017.

According to this newspaper, at the same time, steps were taken to reach an understanding that would allow the parties involved to minimize losses. A debt forgiveness agreement that focused on the Berardo Foundation – which at the end of 2017 had a financial hole of 517 million euros – and the collection of works of art of the Madeiran businessman, but that did not materialize. The agreement fell apart with Berardo's refusal, this year, to hand over valuable pictures to the bank as a form of payment for the restructuring of the loans.

The banks ended up following the judicial process, demanding the execution of pledges of the bonds of the ACB given as reinforcement of guarantees and that already make up the totality of the titles of participation of the owner of the art exhibition exposed in the CCB. In addition to the commander, three related companies are targeted: Metalgest, the José Berardo Foundation and Moagens Associadas.

The figures released by the press indicate that in the second half of the last decade Berardo was financed mainly by Caixa Geral de Depósitos (around 400 million euros) and BCP (another 400 million) and BES in smaller scale ( 200 millions). Only Caixa and BCP had 80% of Berardo's credits, and BES the remainder.

Article published in issue no. 1988, of May 10, Jornal Econômico

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