Portuguese State will not have administrators in Novo Banco

  • ECO News
  • 29 March 2017

Novo Banco's sale is (really) in the final stretch. The Government and Brussels have met half way: the State will hold a minority stake of 25%, but it will be a sleeping partner.

Novo Banco‘s sale is (really) in the final stretch. After many months of negotiation with Lone Star, the Portuguese Government was finally able to reach an agreement with Brussels: it will have a 25% stake, but no administrators in the bank nor voting powers. These were the European authorities’ impositions in order to accept the State’s stake along with the North-American fund. Portugal will own shares and the responsibility of capitalizing the bank if necessary, but it will have no rights in the management of  the bank.

As previously disclosed by ECO, the European Directorate General for Competition (DGComp), as matter of principle, was against maintaining an equity stake from the State — even if it is a minority stake — in Novo Banco, within the sale agreement to Lone Star. Even so, Brussels gave in, reaching an agreement with the Portuguese government concerning the sale of the transition bank.

Quoted by the Portuguese news agency Lusa, the EU Competition commissioner Margrethe Vestager stated: “Of course, we have discussed with the Portuguese authorities, as we discussed with others, if they are in a situation where they want to change their commitments. Our mission is to ensure that the changes are balanced. Therefore, if someone wants to do something, maybe favoring one of the involved parties, then it is necessary to balance this by taking on commitments in another area. But the process is still ongoing and it is the responsibility of the Portuguese authorities to guarantee the sale“, she stated.

ECO also knows the State will have the 25% stake without a minimum lock up period, in addition to having no voting rights nor a place in the administration; shares will be common. In the deal, Lone Star is committing to placing 750 million euros in Novo Banco‘s share capital, as well as reinforcing the capitalization with over 250 million euros in a second stage, on the short term, a source close to the negotiations told ECO. When contacted, Lone Star refrained from commenting.

The operation should be concluded by the end of this week, since it was the deadline set for the exclusive negotiations between the Government and Lone Star. Novo Banco‘s capitalization will still have a third operation, of transforming up to 500 million euros of bonds in capital.