Updated | Bank of Valletta will appeal Italian precautionary warrant for €363 million

Bank of Valletta will appeal an Italian court’s order for a precautionary warrant requesting €363 million to be hived off, as a provision for damages requested by bondholders of a shipping company that went bankrupt.

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

BOV chairman Deo Scerri sounded a confident tone in a press conference held following the news, that the bank had a solid case.

“We have taken legal advice, and we feel we have a strong case both on the merits and in appealing the precautionary warrant. We are firmly rebutting the claims instituted,” Scerri said.

He also said the bank was keeping regulators and the European Central Bank continuously updated on developments relating to this case.

“Our operations are not adversely affected,” he said. “Even if we lose the appeal, we have other avenues to pursue.”

Scerri also said that the precautionary warrant does not affect shareholders and rubbished suggestions that its recent €150 million rights issue was related to the Deiulemar case. “We have €2.9 billion parked with the ECB for capital requirements… we would use this money to hive off €363 million on the precautionary warrant.”

The court decision is only related to the request by liquidators for BOV to make available the money as a guarantee for damages. The case dealing with BOV’s role in the trust that held the bankrupt shipping company is still ongoing.

Scerri scoffed at suggestions by the liquidators that BOV was unable to meet its obligations. “We have credit ratings that are higher than Italy’s top five banks,” he 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.

Bank of Valletta yesterday said that it had carried out an internal review of the due diligence employed when taking on the Deiulemar trust, when in 2014 the company bondholders filed a claim against the bank and Banco Svizzero d’Italia Trust Corporation Limited Malta, a subsidiary of Swiss bank BSI, of Lugano.

Bank of Valletta became a trustee for Trust Capital Trust, Trust Gaino, and Trust Gilda, which are being called on to answer for the €363 million claim.

“The fraudulent actions took place in 2008, a year before BOV took over the trust,” BOV’s legal consultant Louis de Gabriele said. He said the bank had not been aware of the company controlling the Deiulemar shipping company itself, and of the liabilities they were hiding. “In 2009, there was no central register for ultimate beneficial owners.”