Banco de Portugal Chooses Lone Star To Buy Novo Banco

5 January 2017 – ABC

The Board of Directors of Banco de Portugal has selected the US fund Lone Star to participate in the final negotiations to purchase Novo Banco. Its decision is based on the fund’s €770 million proposal, which would be accompanied by a subsequent injection of an equivalent amount to strengthen the bank’s capital.

But Antonio Costa’s Socialist Government will have the last word, and so the complex process is far from complete. Even so, it is clear that Lone Star’s offer is the most attractive, after the bid from the Chinese giant Minsheng was deemed to lack the necessary financial guarantees.

Lone Star’s only competitor in the bidding was an alliance between two other US private equity funds, Apollo and Centerbridge, whose most senior managers travelled to Lisbon to try to complete their negotiations against the clock.

The major difficulty stems from the fact that Lone Star is shielding itself through the creation of a commission bridge that holds Novo Banco’s non-strategic assets. Novo Banco is the cleaned up heir of the now extinct entity Espírito Santo. That situation is something that concerns the Portuguese Finance Minister, Mário Centeno, to such an extent that he has even raised the possibility of nationalising the entity.

In any case, the proposal from Lone Star falls well below the figure required for the operation to be considered a success by the Portuguese State, given that it put €4,900 million on the table in 2014 to avoid the total collapse of the entity when Espírituo Santo went bankrupt that same year.

Original story: ABC (by Francisco Chacón)

Translation: Carmel Drake