On Aenor and Lusoponte as financial vehicles

The discussion on financial vehicles is definitively on. And is now finally reaching Portugal.

Vehicles are accounting and financial constructions to allow for a credit detachment from the main corporation. They are usually build to ensure credit quality without harming the main corporation debt level - thus lowering financing costs. They played at the forefront of the financial market from the late 90's throughout the past decade. But they were also one of the reasons for the financial market crumble of the last 2 years - the detachments were not as real as the money lending had assumed. Actually, they allowed companies to raise money at a lower cost vs the real incurred risk. And when the projects these vehicles financed came crumbling, it became obvious they were not really independent from the companies that created them - meaning they grabbed and pushed those companies in their fall. Some of the largest bankruptcies over the last year occurred as vehicles were unable to sustain themselves, creating a domino effect on both companies and lenders.

Aenor and Lusoponte are two consortiums put together to build and operate large road infrastructures in Portugal. They were built as financial vehicles, to allow for cheaper financing for both the vehicle (as it presented the infrastructure as a direct guarantee) and the companies behind them (as the debt incurred was not fully consolidated). And they are now in the center of the vehicles discussion in Portugal.

Banco de Portugal (regulatory entity for Portuguese banking system) is asking for an accounting review on this projects and the way some banks (namely BCP, one of the largest Portuguese banks, and one of the most affected by the nowadays crisis) consider them on their lending figures. If those vehicles are fully reflected as actual risks of the mother companies (specially Mota-Engil, the largest represented company), it may change the actual credit picture of those companies and banks. And mean a very different risk exposure image vs the one that is now presented at our eyes. With the subsequent finance cost implications for those companies and banks. But not considering the lessons on vehicles that we learnt over this past year, may simply mean that we are ignoring a huge possible pitfall - the kind of backfire that may give a strong shake to the Portuguese economic system.

http://economia.publico.clix.pt/noticia.aspx?id=1412557