Lone Star will pay a “symbolic price” for Novo Banco

  • ECO News
  • 22 February 2017

Lone Star is willing to pay one billion to Novo Banco, but how much will they pay the Resolution Fund for the control of the bank? A "symbolic price".

The Lone Star fund will start exclusive negotiations with the Government for the acquisition of Novo Banco, about 13 months after the race for its acquisition began. ECO knows, through a source close to the negotiations, that Lone Star will pay the Resolution Fund a “symbolic amount”.

After months of negotiations between the Bank of Portugal and Lone Star, there was a shift in Novo Banco‘s purchase terms because the Finance minister declared the state would not give any guarantees to the bank. Because of this, Lone Star demanded sharing the risk with the Portuguese State through another model: the State would remain a shareholder — likely not through the Resolution Fund — with a minority stake. Although the final decision is up to the prime minister António Costa, both Brussels and the European Commission for Competition must authorize the model.

The North-American fund will place one billion euros in the capitalization of Novo Banco, a 250 million euros increase when compared to the offer chosen by the Bank of Portugal on February 4; Lone Star was willing to pay 750 million euros to the Resolution Fund in exchange for 100% of NB — which is far, of course, from the 4.9 billion capital injection from when the bank was created, out of which 3.9 billion were borrowed from the State. Now, the check will have a “symbolic amount”.

With the negotiations, the Portuguese government also intends to involve senior bond holders in the bank’s capital reinforcement: the solution would be to convince those bond holders, especially those who invested in long-term senior bonds, to become shareholders, investing no more than 750 million euros.