LISBON, Oct 20 (Reuters) - Shares in Portugal Telecom plummeted to a record low on Monday after the bankruptcy of Espirito Santo holding company Rioforte raised the risk it will not recover 900 million euros ($1.2 billion) in debt from the company.
Portugal Telecom (PT) stock has repeatedly hit fresh lows in recent weeks on mounting uncertainty over the company after the resignation of chief executive Zeinal Bava from PT's Brazilian partner Oi and reports that Oi could sell its Portuguese assets.
Two negative research reports added to the pressure. Morgan Stanley set a price target of 0.79 euros a share on Friday while Berenberg recommended investors to stay clear of PT shares.
Shares in PT, which no longer has operating assets and just holds a 26 percent stake in Oi and the Rioforte debt, fell as low as 0.8650 euros and were last down 15 percent at 1.0350 euros a share.
"Portugal Telecom shares remain an uncertain prospect, in our view," Berenberg said.
Rioforte had already defaulted on its repayment of 900 million euros in debt to PT, but Rioforte's liquidation after it was denied creditor protection is likely to make it even harder for PT to recover its funds.
"Our understanding is that an Oi sale of PT assets would only benefit PT shares to the extent that such a sale boosts the Oi share price," Berenberg said. "As such, we still think that investors looking for exposure to this situation are better off owning Oi directly, rather than the more leveraged PT shares."
Oi and PT combined their assets this year but PT's investment in the Rioforte debt forced a renegotiation of the terms leaving the Portuguese company with a much smaller stake in the new joint company.
PT shares are down 60 percent this year.
1 US dollar = 0.7831 euro Reporting by Axel Bugge; Editing by Mark Potter