(Adds detail, SRB comment)
By Francesco Canepa
FRANKFURT, Feb 9 (Reuters) - European authorities used a "flawed" negative valuation for the sale of Spain's failing Banco Popular last year which undermined the process, a law firm seeking redress for investors who lost money on the bank's bonds said on Friday.
Popular's sale to Banco Santander in June for a nominal one euro included the writing off of all "subordinated" debt and was hailed by regulators as a successful first test of a new European model aimed at shielding taxpayers and depositors.
But law firm Quinn Emanuel is now contesting the Single Resolution Board's decision to write off Popular's shares as well as bonds totalling 2 billion euros, which was based on a valuation by consultancy firm Deloitte.
Deloitte cautioned its valuation of Popular -- which was between 1.3 billion euros and negative 8.2 billion euros -- was "highly uncertain and provisional" and the real value could best be determined through an open sale.
As previous attempts to sell Popular had failed, the SRB instructed Spanish authorities to seek bids and previous suitors BBVA and Santander were offered the writedown of one or both classes of subordinated bonds to sweeten the bid.
"The flawed valuation of BP (Banco Popular) raises fundamental questions about the validity of every step taken by the SRB in this so-called 'textbook' resolution process," Quinn Emanuel lead partner Richard East said in a position paper.
An SRB spokeswoman said the authority had acted appropriately "given the circumstances" and did not want to comment on "accusations and speculations", while a spokesman for Deloitte declined to comment.
Popular, saddled with bad debt and facing a run on its deposits, was declared "failing or likely to fail" by the European Central Bank (ECB) on June 6.
On the same day, Deloitte put its best estimate at minus 2 billion euros, according to a redacted version of its report published by the SRB last week.
The SRB said in its June 7 authorisation of the sale of Popular that it considered Deloitte's valuation of minus 8.2 billion euros as "decisive", which would have implied even greater writedowns. But, having received Santander's offer, it decided to spare Popular's senior creditors.
Quinn Emanuel, which has challenged the SRB's decision in the European Union's General Court, is now considering further steps to obtain the redacted parts of the SRB documents.
The law firm is representing bondholders including asset manager Pimco and hedge funds Anchorage Capital Group, Algebris Investments and Cairn Capital. (Reporting by Francesco Canepa; Editing by Balazs Koranyi and Alexander Smith)