Brussels Approves Sale of Novo Banco to Lone Star

11 October 2017

The European Commission (EC) approved the sale of Novo Banco to Lone Star under the European rules on state aid.

A statement by the EC informed that three questions had been assessed in relation to state aid: “competition in the sale process the transition bank”; the “plans of the Portuguese authorities to cede a state guarantee that would allow the conclusion of Banco Espírito Santo’s resolution and the sale of the transition bank” and the “viability of the entity resulting from the sale of the bank.”

The statement added that the approved state aid measures would allow the US Lone Star fund to launch “its ambitious restructuring plan, which aims to ensure the long-term viability of the bank while limiting distortions to competition.”

According to the European Commissioner for Competition, Brussels accepted “Portugal’s plans to grant State aid to Novo Banco under European Union (EU) rules, based on the large-scale restructuring plan and the measures adopted by the bank to limit distortions to competition.”

Margrethe Vestager added that it is “important that the new owner applies the plan effectively so that the bank can support the Portuguese economy.”

In August 2014, Portugal liquidated the Banco Espírito Santo (BES) under the Portuguese banking resolution framework and established a strategy for its resolution, including some support measures, such as state aid for the transfer of BES’ assets to a transition bank, the Novo Banco.

Novo Banco is held by the Resolution Fund – an entity owned by banks but managed by the Bank of Portugal. In March, a purchase and sale contract was signed between the Resolution Fund and the US Lone Star Fund, selling 75% of Novo Banco, while maintaining the Resolution Fund’s participation at 25%.

Lone Star agreed to a 1-billion-euro injection of capital into NB, of which 750 million will be transferred when the deal is completed and the other 250 million by 2020.

Original Story: Jornal i – Magalhães Afonso

Translation: Richard Turner