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Oitante Posts a Profit and Reduces Debt by 25%
25 April 2018
The special investment vehicle, which holds Banif’s former banking assets that were left out of the sale to Santander, ended 2016 with a profit of 11.4 million euros. It also expects to pay off all of its debts by 2021.
Oitante, a company that received the banking assets of the former Banif that did not go to Santander Totta, had a troubled start. In its first months of existence, it did not have enough money to pay its employees’ salaries, but by 2016 the company had already generated enough liquidity to reduce debt significantly and generate a profit of €11.4 million, Oitante’s president, Miguel Artiaga Barbosa, told the Jornal Econômico.
“From 2015 to the end of 2017, we have been able to reduce Oitante’s debt by 25%. If we can fulfil our business plan, which has a horizon of five years but can be extended, we will be able to pay the entire debt by 2021,” the executive in charge of the company that belongs to the state-owned Resolution Fund, stated. He added: “And possibly even pay an extraordinary dividend to our shareholder.”
The reduction in Oitante’s debt over the last two years was possible due to a strategy that has focused on asset sales – subsidiaries, real estate and Non Performing Loans (NPL) – along with a reduction in operational costs, to generate liquidity.
At the end of 2015, when the Oitante was created following Banif’s liquidation, its debts amounted to 794 million euros, of which 746 million were bonds. At the end of 2016 the total debt stood at 701 million euros and continued to decrease in 2017, he added.
Oitante’s debt has an average maturity of 10 years and a cost of 3%, which represents 18 million euros per year. “We will seek to refinance the debt, to reduce the cost,” Oitante’s president stated, noting that the payment of the debt has been made exclusively using equity.
The company recently finished its accounts for 2016, fulfilling the target set for public institutions. “The company’s situation has been normalised, and the 2017 accounts will already be presented in the normal calendar year,” he said.
Voluntary dismissal of 355 employees
The cost reduction was partially generated by the departure of 355 of the 449 employees that Oitante had when it separated from Banif in December 2015.
“The team we had at that time was too big and was not geared to Oitante’s activity,” Mr Barbosa explained. They were people who worked in the bank and who, suddenly, saw their world collapse with Banif’s liquidation. Not a part of the business areas that were sold to Santander, hundreds of employees of commander Horacio Roque’s former empire had to work in a company whose mission is to manage assets and later liquidate them after maximising their value.
“It’s completely different from working in a commercial bank, and it was a very difficult situation from a psychological point of view,” said Tiago Santos, a member of the board of directors of Oitante, who also took in the conversation with Jornal Econômico.
To reduce the number of staff in 2016 and 2017, the Oitante carried out two sets of voluntary dismissals with the help of a specialised psychologist, while maintaining a dialogue with the workers’ representative structure. In the second voluntary dismissal program, the company paid employees an amount corresponding to two months of wages for each year of work, also giving the ex-employees the right to SAMS (Social-Medical Assistance Service), as defended by the workers’ commission.
“We wanted to do this correctly and as painlessly as possible, so that people can continue their professional lives in the financial sector or in other areas they prefer,” Miguel Artiaga Barbosa stated.
The reduction in costs also occurred with the renegotiation or termination of contracts with suppliers and with the centralisation of the company’s activity in two spaces, in Lisbon and Porto. “We reduced the occupied area by 79% and lowered our installation costs by 92%,” Mr Barbosa explained, adding that the buildings that were vacated were placed on the market, including the building on Avenida José Malhoa in Lisbon, whose sale is currently being negotiated.
Discount on real estate sold was 8% against net book value
The assets sales are, moreover, a fundamental part of Oitante’s management strategy. In the beginning, the company was flooded with offers for real estate that included haircuts of 66%, the same percentage that the Bank of Portugal had imposed in Banif’s liquidation. “We had to tell those who were interested that we would not sell at fire-sale prices,” the executive said, adding that to date the real estate that was sold for 250 million euros has not suffered significant discounts because Oitante has been careful in these sales and the real estate market has been on the rise. In average terms, the discount was 8% against the net book value of Banif’s accounts for 2015, though the sales registered a premium of 12% against the net book value included in Oitante’s initial accounts.
The sale of subsidiaries is also moving ahead, as is the case with the Banif Investment Bank, which is awaiting a green light from its European supervisor, due to a procedural issue that has to be completed by the buyer, the Chinese group Bison.
With the sale of real estate, NPL portfolios and subsidiaries, Oitante managed to reduce its balance sheet by 28%, compared to the 2.2 billion euros it registered in 2015.
Original Story: Jornal Econômico – Filipe Alves
Translation: Richard Turner