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Europe's second-highest court on Wednesday dismissed claims by shareholders and creditors over losses they suffered in the 2017 rescue of Spain's Banco Popular, saying the deal was the best option in the circumstances.
The European Union's Single Resolution Board (SRB), set up to limit the cost to taxpayers from failing banks, orchestrated an overnight rescue of Popular in June 2017, with shareholders and some bondholders taking losses as it was sold for a nominal one euro to larger Spanish rival Santander (SAN.MC).
Spanish and EU authorities hailed the case as a successful first test of so-called bail-in rules, where investors and creditors bear much of the cost of a bank rescue.
But more than 40 major shareholders, among them Mexican investor Antonio del Valle, and junior bondholders affected by the deal filed claims against the SRB and European Commission, arguing the bank was not necessarily on the verge of collapse.
In its ruling, however, the European General Court said Popular was "failing or was likely to fail and that there were no alternative measures capable of preventing that situation."
Del Valle was not immediately available for comment through Mexican lender BX+, where he is honorary member of the board.
Among the bondholders that filed the lawsuit were Algebris and Anchorage Capital Group. Law firm Quinn Emanuel, which represented them, was not immediately available for comment.
These investors had sought the annulment of the SRB's decision to wind down Popular, alleging European institutions had failed to undertake a proper and independent valuation prior to the decision.
The court said on Wednesday that, given the time constraints and available information, some uncertainties and estimates were inherent in any provisional valuation, but the reservations expressed by an expert who carried out that valuation did not mean it was not "fair, prudent and realistic".
It also said the decision to convert Popular's capital instruments in the resolution scheme "did not constitute an excessive and intolerable interference", and must be regarded as a "justified and proportionate" restriction to property.
Popular had a stock market value of around 1.3 billion euros on the day it was bailed out. Some 1.9 billion euros worth of subordinated and convertible bonds were also wiped out.
The ruling comes roughly a month after the EU's highest court, the European Court of Justice (ECJ), said Banco Popular shareholders who took part in its capital increase in 2016 were not entitled to compensation for losses. read more
The latest ruling can be appealed before the ECJ within two months and 10 days of notification of the decision.