Bank of Valletta pays 182.5 million euros in out-of-court settlement with Deiulemar

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The Bank of Valletta has reached a €182.5 million settlement to settle a massive €363 million claim from bondholders of a defunct Italian shipping company based in a city in southern Italy.

The bank appealed the forfeiture of a precautionary security worth €363 million last December when it contacted the Deiulemar Group’s insolvency administrators to explore the possibility of a mutually satisfactory out-of-court settlement of the dispute.

“An agreement was reached earlier today between the Bank and the Curators whereby the Bank, without acknowledging any liability on either side, will pay the sum of 182.5 million euros to the Curators for the full and final settlement of the disputes and all claims that was made by made against the bank by the curators,” BOV said on Tuesday. “The bank is now more capitalized overall and better positioned to conduct its business with confidence and sustainability.”

An Italian court had already ordered the forfeiture of a precautionary security worth €363 million from the Bank of Valletta in a successful lawsuit by 13,000 bondholders of the defunct Deiulemar shipping company.

The bank had tried a €50m offer for Deiulemar bonds last year to settle the claim out of court but was turned down.

As part of the Torre Annunziata proceedings, BOV was required to pay an amount equal to the value of Deiulemar shares, which had been settled in escrow with the bank as trustee. The Bank of Valletta disputes the valuation of these shares, saying they are worthless following the Deiulemar Group’s bankruptcy.

In 2018, by order of the Tribunal de Torre Annunziata, the bank placed more than 363 million euros in the hands of an independent body as a precautionary security. No new payment will be made as a result of today’s decision.

The Bank of Valletta faced such a large claim for damages because in 2009 it took over a trust with assets of 363 million euros from the company Deiulemar, which filed for bankruptcy in 2012.

A criminal court in Rome had already found in 2004 that the Deiulemar company had reported too few liabilities of 700 million euros. In 2014, seven members of the three founding families of the Deiulemar company were sentenced to up to 17 years in prison for illegal financial transactions because they owed creditors 800 million euros.

The bank had conducted an inquiry into the nature of the due diligence when it became trustee for Trust Capital Trust, Trust Gaino and Trust Gilda – who are being asked to stand by the €363m claim.

The €363 million claim is the tip of the iceberg in a story of massive fraud in southern Italy that has seen over 13,000 bondholders wipe out their savings.

Investors in the Neapolitan province of Torre del Greco have protested the loss of their investments following the €800 million fraudulent bankruptcy of shipping giant Deiulemar.

In July 2014, seven members of the three founding families of shipowner Deiulemar were sentenced to up to 17 years in prison for illegal financial transactions when the company collapsed. It was declared bankrupt in 2012 with debts of more than 800 million euros.

They were found guilty of fraudulent bankruptcy after transferring their assets to Maltese, Swiss and British Virgin Islands trusts to avoid exposure to creditors and Torre del Greco’s 13,000 private investors who subscribed to their bonds.

The European Court of Human Rights had dismissed BOV’s claims of unfair treatment in Italy because the bank had not exhausted all its remedies in Italy.

The bank had complained about being denied a fair trial in the courts of Torre Annunziata, a small provincial town where the majority of the creditors demanding compensation from BOV come from.

BOV CEO Rick Hunkin had told MaltaToday that the bank did not want to see the case through the various levels of court proceedings as it wanted to rid itself of this “shadow that has been hanging over the bank for a number of years”.

He said the bank was determined to settle the case out of court, although it maintained its position that it was not at fault and played no role in the decision-making that caused investors to lose their money.

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