UPDATE 2-Brazil's Oi says Portugal Telecom did not disclose Rioforte debt
(Adds Portugal Telecom statement, latest share performance)
By Brad Haynes and Axel Bugge
SAO PAULO/LISBON, July 3 (Reuters) - Brazil's Oi SA said on Thursday that before they combined assets, Portugal Telecom SGPS SA did not disclose an investment in the holding company of a key shareholder under investigation in Luxembourg.
Oi said it would defend its interests as it pressed for more information, reflecting a growing gulf between the telecommunications companies in the midst of a drawn-out merger.
Portugal Telecom said it was intent on resolving questions over the acquisition of 897 million euros ($1.22 billion) in debt from Rioforte, which is held by one of the Portuguese company's biggest shareholders, the Espirito Santo banking family.
The investment in the debt of one of the family's holding companies became an issue after the group came under investigation in Luxembourg for irregularities.
Analysts have warned of credit risk from the Rioforte debt - equal to roughly 40 percent of Portugal Telecom's market value - that matures this month and set off investor concerns about the merger formalized in an April 28 share offering.
Shares of Portugal Telecom fell 7.3 percent in Lisbon to their lowest in nearly two decades. Oi lost 2.6 percent on the Sao Paulo stock exchange, falling in tandem with its merger partner for the fifth straight session.
"Although the merger between Oi and Portugal Telecom is in its final stages, the investment in Rioforte's commercial paper is triggering an open conflict and driving the two companies apart, just when they should be approaching total integration," said Steven Santos, a manager at the XTB Portugal brokerage. Continuación...