Apollo doesn’t have a binding offer for Novo Banco yet

The Bank of Portugal chose the Lone Star fund as the front runner for the acquisition of Novo Banco, but still told the government and market that they would continue negotiating with the other candidates. The problem is that the only possible alternative – the Apollo/Centerbridge consortium, since China Minsheng’s offer was off the table – is still not officially an alternative. ECO is aware that the consortium is still undertaking due diligence and, without it, there will not be a binding proposal.

The proposals from the Lone Star fund and the Apollo/Centerbridge consortium are still being negotiated, although in Portugal nationalization is being discussed as a possibility. Both purchase offers include guarantees from the State, meaning, risking taxpayer’s money; the minister of Finance excludes this option, but in spite of this, the Bank of Portugal, Lone Star and Sérgio Monteiro’s team are pursuing further talks.

Since the Bank of Portugal stated the negotiations with Lone Star do not exclude the improvement of the remaining bidders’ offers, the Apollo/Centerbridge consortium had extra time to finish their assessment of Novo Banco – the due diligence, which is still not finished. ECO knows, according to sources familiar with the negotiations, that Lone Star and the consortium are in a tough position: “It is more complex than just dropping the state’s guarantee”.

Novo Banco’s acquisition process started officially on January 15, 2016; a year later, there is still no obvious solution in sight. The deadline set by Brussels ends on August 3, under penalty of being liquidated; nationalizing the bank may seem like the best option for some political parties, but the DBRS has warned about its risks for Portugal’s rating.