Lone Star may not demand State guarantees for Novo Banco

  • ECO News
  • 30 January 2017

Lone Star should drop their demand for State guarantees in the purchase of Novo Banco, says politician and commentator Marques Mendes. If so, it will be “a great victory for the government”.

Lone Star has been appointed the best placed offer for the acquisition of Novo Banco. Marques Mendes says there are signs that the North American fund really wants to purchase the bank, so much so that they are willing to withdrawal their demand for State guarantees, which the Government was unwilling to give.

Concerning Novo Banco, Marques Mendes stated, on his weekly commentary this Sunday night on the Portuguese TV channel SIC, that “all signs point to the Americans from Lone Star really wanting to have the bank”. They are “investing in improving their image” – which means hiring Líbano Monteiro, by means of his corporate communication consultancy JLM&A, to advise the operation. The fund also states they have some “national partners” to purchase the bank.

But more importantly is that “they will be available to withdraw their demand for State guarantees; if it turns out to be true, it is a nice victory for the Government, who had said that would be crossing the line”.

Aside from the 750 million euros’ offer for Novo Banco – and a 750 million injection –, the Lone Star fund demanded State guarantees of 2.5 billion euros, an amount the fund says they never heard of. These guarantees aim to cover the risks associated with Novo Banco’s ‘side bank’, meaning, the bank’s unprofitable assets worth nine billion euros.

The problem with the guarantee was the impact it would have on public accounts – namely a threat for the deficit. That is the reason Mário Centeno stated he was not willing to sell the bank with constraints such as the demand for an “insurance” for the funds, which mean a significant risk for Portugal. This stand is emphasized by the minister of Finance Mário Centeno’s statements, in which he leaves the door opened for nationalization.