Portugal Central Bank Will Bailout Banco Espirito Santo

Last month, analysts pegged the worst case scenario for Banco Espirito Santo SA (ELI:BES), huge losses necessitating a government bailout, at about 5%. Today, the worst case has come true as Portugal’s central bank announced that it would break up BES into a good and bad bank, extend billions in euros to stabilize the former and start winding down the latter. Banco Espirito Santo SA (ELI:BES) will receive €4.9 billion ($6.6 billion) and depositors and senior bondholders are expected to remain whole, while subordinated debt holders and shareholders (which likely includes Seth Klarman’s Baupost Group) can expect to take a…