Updated | Bank of Valletta loses Italian court appeal on €363 million precautionary warrant

€363 million to be frozen after BOV loses appeal in Italian liquidation case on bankrupt shipping giant Deiulemar • BOV says case has absolutely no impact on its operations

Updated at 6:30pm to include BOV press conference report

Bank of Valletta has lost an appeal against a €363 million precautionary warrant that was originally upheld by an Italian court in June.

The claim was filed by liquidators of the Deiulemar shipping group and representatives of 13,000 Italian bondholders who lost their life savings when the company went bust.

The liquidators insist that the €363 million is held in trust at BOV by owners of the collapsed shipping giant Deiulemar, which went bankrupt in 2012 with losses of over €800 million.

In March, a court at Torre d’Annunziata ordered the seizure of €363 million form the bank in a a precautionary warrant, which the bank now will pass on to a financial intermediary.

The Italian court in Torre d’Annunziata, a province of Naples, upheld the claim back in March after it was brought by liquidators of the Deiulemar group and representatives of the company’s 13,000 Italian bondholders.

BOV had placed on its own initiative the whole amount of the ‘sequestro conservattivo’ with another bank, pending the appeal proceeding. “However, these assets still belong to the bank, held in the bank’s own name and for its own benefit. Therefore, nothing has changed since the bank’s statement of last March,” BOV said.

Bank of Valletta took over a trust that held €363 million in assets of shipping company Deiulemar in 2009, which filed for bankruptcy in 2012. Two years later, seven members of the three founding families of the Deiulemar company were jailed for up to 17 years for illegal financial transactions when the company collapsed. It was declared bankrupt in 2012 owing more than €800 million.

They were found guilty of fraudulent bankruptcy, having transferred their assets to Maltese, Swiss, and British Virgin Islands trusts to avoid their exposure to creditors and the 13,000 retail investors who subscribed to their bonds.

“The bank was never in possession of any funds as a trustee when it was established in 2009, and the only trust assets it held consisted of shares in a Madeira-registered company, part of the Deiulemar Group, which was declared bankrupt in 2012,” Bank of Valletta had said.

BOV fears it will not get a fair hearing

Bank of Valletta fears it will not get a fair hearing on the Deiulemar case in the Italian town of Torre d’Annunziata and is asking that it be heard elsewhere.

BOV chairman Deo Scerri said this afternoon that in a town of 40,000 inhabitants, some 13,000 people had lost their life savings when the shipping group went under.

“In these circumstances, we feel BOV may not have a fair hearing in the locality, which is understandably heavily charged on the case,” he said, adding the legal advice held by the bank suggested it had a solid case.

The bank called a press conference to allay any fears that the case could impact its operations.

Scerri insisted that even if BOV eventually lost the case – something it was confident it would not - the €363 million was a “drop in the ocean”.

“The case has no impact on workers, depositors or shareholders. The bank has a balance sheet worth €12 billion and is in a strong position,” Scerri said.

On the rejected appeal concerning the €363 million that were hived off by BOV as security, Scerri insisted the money still belonged to the bank.

“The €363 million still belongs to BOV and is held in shares and bonds with an Italian bank. Any interest derived from this amount comes BOV’s way because the investment is still ours,” Scerri said, adding it had no impact on profitability.

Asked about the due diligence back in 2009 when BOV had taken Deiulemar shares as part of its trust business, BOV CEO Mario Mallia said all the check boxes were ticked at the time.

“However, one has to keep in mind that due diligence standards at the time were not what they are today and this case is one of the reasons why BOV wound down its trust business and is no longer involved in it,” Mallia said.

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