Goldman Sachs Group Inc. share price, loaned $835 million to Banco Espirito Santo shortly before collapse

In July 2014, Goldman Sachs Group Inc. gave a loan estimated to $835 million to Banco Espirito Santo SA, once Portugals biggest publicly-traded bank by market capitalization, just a few weeks before the units of the group sought creditor protection. The loan was given through Oak Finance Luxembourg SA a month before the Portuguese lender was bailed out in a deal that could cause severe losses to Goldman.

At the time when Goldman Sachs loaned the sum to BES, the Portuguese lender was almost unable to borrow directly in the capital markets. A person with knowledge of the matter reported that in July this year, Goldman Sachs formed a Luxembourg-based financing vehicle called Oak Finance, which purchased BES bonds with intentions to sell them on at a profit to investors.

Estimated at $835 million, the loan started out as a lucrative opportunity for Goldman, but turned into a money loser. The lender intended to sell BESs debt to outside investors but struggled to find buyers for a large part of it due to the recently arisen investor concerns regarding the Portuguese lenders financial condition.

A month later, Banco Espírito Santo filed for creditor protection, having struggled with a liquidity crunch, and was bailed out by Portugals central bank. This left Goldman holding a large part of unsold BES bonds. It had managed to sell an unknown quantity before the central bank intervened but it remains unclear how much Goldman may ultimately lose from the transaction.

According to Bloomberg, a document showed that the Wall Street bank had agreed to the funding on May 16th. This happened only four days before the Portuguese lender warned investors buying stock in its rights offer that a parent company was in a “serious financial situation”, which could hurt the banks reputation. Regulators are probing the inter-group funding practices.

Goldman Sachs Group Inc. rose by 0.82% on Friday to close at $179.11 per share in New York, marking a one-year change of +16.59%. The company is valued at $78.91 billion. According to CNN Money, the 23 analysts offering 12-month price forecasts for Goldman Sachs Group Inc. have a median target of $181.00, with a high estimate of $213.00 and a low estimate of $133.00. The median estimate represents a +1.06% increase from the last price of $179.11.