What will happen to Banco Popular’s subordinated bonds and bonds convertible into shares, and to its shareholders?

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Following yesterday’s news that Banco Popular has been bought for 1 euro by Banco Santander, thousands of investors and bondholders are worried about what will happen to their investments.

As for the buyers of Banco Popular Subordinated Bonds, these were sold to retail customers for an amount of more than 450 million euros between 2009, 2010 and 2011, with maturity dates of 22 December 2009, 29 July 2021 and 19 October 2021, the minimum investment in these bonds was 1,000 euros per bond but after the purchase of Banco Popular by Santander they have lost all their value, as they will be transformed into shares that today are worthless.

Why does the purchase of Banco Popular entail the loss of the entire investment?

The reason is because the FROB’s decision for Banco Santander to acquire Banco Popular entails “a full redemption” of all the shares of Banco Popular, as well as all the Additional Tier 1 and Tier 2 instruments issued by the bank, in shares of the bank chaired by Ana Botín, has paid the symbolic amount of one euro, since the total of these 450 million are computable as Tier 2, so it has served to absorb the losses, so the share price is now practically zero, thereby condemning retail customers to lose all their money.

And as for the Convertible Bonds into shares, whose value is 1,250 million euros and which were issued in 2013 (worth 500 million) and 2015 (worth 750 million), just like the subordinated debt, they are transformed into shares that are worth nothing.

The only investors who are unscathed in the fall of Banco Popular are those who acquired senior debt, as well as those who have their deposits in the bank which are guaranteed.

What can retail customers of BONOS SUBORDINADOS and BONOS CONVERTIBLE INTO BANCO POPULAR SHARES do? According to the lawyer Fernando Salmerón, director of the law firm Bufete Salmerón in Seville, a law firm specialising in banking law and which represents more than 100 Andalusian families who bought these financial products, there are legal mechanisms for them to recover their investment, applying the same jurisprudence established by the Supreme Court, in its judgment of 17 June 2016 which declared the nullity of the bond acquisition contract due to the infringements committed by Banco Popular itself.

Similar cases to these are the Bankia preference shares and the so-called “Santander securities”. In this instance, Bufete Salmerón managed to recover the amount of the marketed product for hundreds of affected people, even after the four-year period for their claim had elapsed.


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