Portugal's Espirito Santo clan is preparing to file for creditor protection for one of its key holding companies, sources said, moving to ring fence prized assets as a deadline for a $1 billion plus debt repayment to Portugal Telecom looms.   

The filing will be made by the company, Rioforte, in Luxembourg, where it is registered, one source close to the process said, adding that the move was aimed at preventing insolvency that would trigger a fire sale of assets.
By 2200 GMT Rioforte is supposed to repay €847m in maturing debt to the country's largest telecom services provider, Portugal Telecom, currently in the throes of a tie-up with Brazil's Grupo Oi, which is likely to amend the terms of the deal in the event of a default.
The sources would not comment on how a creditor protection filing could affect the payment deadline. They said negotiations between Rioforte and Portugal Telecom were still going on.

Concerns surrounding the Espirito Santo banking clan, who founded Portugal's biggest listed bank, Banco Espirito Santo(BES), have flared since an audit of a family holding company that owns Rioforte found a "serious financial situation" there. Last week the worries sent European markets into turmoil.
Further evidence of the family's financial difficulties came late yesterday, when a group company sold a 5% stake in BES, set up more than a century ago, at a deeply discounted price because it had to meet a margin call.
The sale helped push BES shares 20% lower at one point today to record lows just above the €0.34 price at which the Espirito Santo Financial Group (ESFG) sold the 5% stake. 
"The sale by ESFG at a brutal discount shows they are jumping ship," said Jose Novo, a trader at Orey iTrade brokers.             
Yields on BES debt kept climbing on fears bondholders would bear the cost if the bank ran into difficulty, reaching 11.7% on 10-year bonds, up from 10.6% on Monday and more than double where they stood a month ago.
Last week, news emerged that an Espirito Santo family holding company had failed to meet debt payments in full and on time.
PT's Brazilian merger partner is watching the debt payment carefully.
A source close to the deal told Reuters that some large shareholders in Grupo Oi could sue Portugal Telecom if the debt investment ends up in default.
The concerns have driven shares in Portugal Telecom down about a third in the past few weeks and were around 2% lower today.