HSBC sues Brazil’s Schahin Engenharia over unpaid promissory notes

on Apr 3, 2015
Updated: Oct 21, 2019
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HSBC Holdings Plc (LON:HSBA) is suing Brazilian oil-industry supplier Schahin Engenharia SA for 173.6 million reais ($55 million) due to unpaid promissory notes, Bloomberg has reported. The claim, which was filed in Sao Paulo on March 30, does not specify when the notes were supposed to have been paid to the global lender.

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HSBC is among several banks facing potential losses because of the Petrobras scandal .Earlier this year Deutsche Bank and Banco IBM – the local financial unit of IBM Corp – also filed claims against Schahin, seeking payments of 41.2 million reais and 87.1 million reais, respectively. This adds to further pressure on the Brazilian company, which is in a group of more than 20 companies that have been temporarily banned from bidding on new projects with state-controlled Petroleo Brasileiro SA (Petrobras) amid allegations that suppliers and builders paid bribes to inflate the value of contracts.
Excluding credit guarantees, HSBC has the largest loan exposure to Grupo OAS, a Brazilian engineering conglomerate that earlier this week filed for bankruptcy protection for nine of its units. The group, which also faces allegations that it has been involved in the corruption scandal at Petrobras, said in a statement on Tuesday that seeking court protection “was the best way found for the group to renegotiate its debts with creditors and suppliers” because its access to credit has been severely restricted since the end of 2014. Under Brazilian law, OAS has 60 days to present the court with a restructuring plan which will include the name of creditors and their potential exposure.
HSBC’s Brazilian operations are already considered as a potential candidate for disposal, having failed to produce sufficient returns recently. Last year the local unit reported a loss of 535.5 million reais. HSBC’s chief executive officer Stuart Gulliver has cited Brazil, along with Mexico, Turkey and the US, as markets that the bank may consider ceasing operations in.
Under Gulliver, HSBC has embarked on an effort to simplify its structure, cutting around 50,000 jobs and exiting 77 businesses in four years. In February, the CEO hinted that there might be more disposals in the future, although he rejected the argument that the bank is too large to be manageable.
Sandy Chen, an analyst at Cenkos Securities, observed at the time that potential disposals from “the US, Brazil, Mexico, Turkey” would be well-received by the market because they “could relieve both cost and capital burdens”.
In yesterday’s trading, HSBC shares closed up 0.6 percent at 582.30p. The stock has fallen 4.3 percent since the start of the year. The company’s market capitalisation currently stands at £112.2 billion.
As of March 27, 2015, the consensus forecast amongst 33 polled investment analysts covering HSBC has it that investors should hold their position in the company. This stance has been maintained since November 26, 2014, when sentiment from investment analysts deteriorated.
As of 10:14 BST, Friday, 03 April, HSBC Holdings plc share price is 582.30p.

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