464
464
  • Transaction / Assets
    Novo Banco Sells Project Nata
  • Seller
    Novo Banco
  • Buyer
    KKR and Lx Investment Partners
  • € MM
    2150

Novo Banco Finalises Sale of €2.15 Billion in Bad Debts

27 December 2018

The bank led by António Ramalho signed an agreement with KKR and LX Investment Partners to sell a portfolio of bad debts valued at €2.15 billion. The sale is expected to conclude at some point in the first semester of 2019.

The sale is official. Novo Banco sold a portfolio of bad debts comprising 102,000 contracts with a total value of 2.15 billion euros to KKR and LX Investment Partners. The process should be completed during the first half of 2019, the bank said in a statement to the CMVM.

“Novo Banco notifies that, upon completion of a competitive sales process, Novo Banco and Best entered signed an agreement for the sale of a portfolio of non-performing loans (NPLs) and related assets (Project Nata) with a pool of funds managed by KKR and LX Investment Partners.

The portfolio comprises approximately 102,000 contracts with a total value of 2.15 billion euros, subject to the usual adjustments in these transactions up to the completion of the same,” the note reads.

The news confirms a report by ECO in mid-December, which pointed to the likelihood of the sale of the largest portfolio of NPLs ever in Portugal. However, the actual value of the portfolio is higher than the initial estimates of  €1.75 billion (+€400 million), as adjustments to the portfolio widened the scope of the portfolio of bad debts.

Given the size of the sale, the level of Novo Banco’s bad debts is expected to fall to around 6.3 billion euros, instead of 6.7 billion, as was expected until now.

The sale depends on the “verification of all necessary conditions.” For Novo Banco, “this transaction represents another important step in the process of its divestment of non-productive assets,” the bank said in the note sent to the CMVM.

In addition to Nata, Ramalho wants to sell Albatross

The bank has another portfolio of bad debts on sale, though this time in Spain. The sale of Albatross, a portfolio of NPLs valued at 400 million euros, is als0 expected to finalise by the end of the year.

In addition to the sale of bad debts, Novo Banco also sold a portfolio of 9,000 properties to the US-based Anchorage Capital Group for 716 million euros. The servicing companies Finsolutia and Hipoges will take over the management of the portfolio.

The sale of the portfolio of properties was largely responsible for the 420-million-euro loss that Novo Banco posted in the year between January and September of this year. The sale accounted for nearly 160 million euros of the losses that the bank registered in that period.

Bank has a buffer against losses

In order to clean up its balance sheet, the Portuguese state is providing Novo Banco with a sort of cushion against its losses. Portugal pledged to protect the bank of some of its potential losses when it sold 75% of the bank’s capital to the American fund Lone Star.

Since the sale of NPLs and real estate generates impairments, whenever Novo Banco’s capital ratio falls beneath 12.5%, the Contingent Capital Facility is activated. Through the facility, the Portuguese state agreed, where necessary, to provide a buffer against losses on the loans included in the sale negotiated with the Government.

In its half-yearly earnings report, the bank estimated that it would require an injection of €726 million from the contingent capital mechanism in 2019.

Original Story: Economia Online – Flávio Nunes and Paulo Moutinho

Translation: Richard Turner