Novo Banco doesn’t cut it: its Spanish creditor also criticizes the low price of the offer

  • ECO News
  • 8 August 2017

"The tenders are to encourage investors to attend and prices should be higher than secondary levels previous to the tender", criticized Ever Capital, which invested five million euros in Novo Banco.

Novo Banco’s offer ends on October 2, 2017. Paula Nunes / ECO

Two weeks after having launched their bond exchange offer, Novo Banco’s creditors continue having reservations about the price the bank is willing to pay to absorb the around 2.7 billion euros in debt securities. The German society Ever Capital joins the German fund Xaia in criticizing the low price of the offer, which they believe will not convince any investor in participating in the operation.

The Spanish Ever Capital Investments has around five million euros in Novo Banco. They are one of the creditors that the institution headed by António Ramalho is trying to convince to sell their debt securities in exchange for cash or deposits. Novo Banco assures the operation “is in line with the market prices, slightly above last year’s average value”. The goal is to conclude the operation with a 500 million euros capital reinforcement for Novo Banco, but the proposal made on July 24 doesn’t seem to cut it.

“The offer is low”, Eva Rodríguez Roselló, who helped found Ever Capital Investment (headed in Madrid, Spain) told ECO. “Normally the tenders are to encourage investors to attend and prices should be higher than secondary levels previous to the tender. And this is not the case with this tender of Novo Banco”, she adds.

"The offer is low. Normally the tenders are to encourage investors to attend and prices should be higher than secondary levels previous to the tender. And this is not the case with this tender of Novo Banco.”

Eva Rodríguez Roselló

Ever Capital Investment

Even if it is a vital operation for the bank’s future — that is to say, its sale to the North-American fund Lone Star –, what is on the table at the moment does not please many investors, even when considering that the failure of the operation could mean that NB will be liquidated and cause losses for everyone.

According to the terms of the offer, Novo Banco aims to repurchase 36 debt lines for their market value with prices which charge between 10% and 90% of the nominal value of those bonds. Which is the same as saying there are implied discounts between 10% and 90%, which vary according to the line of bonds.

But there are many different cases. For example: zero-coupon bonds, which present longer maturities, have, in theory, a larger discount, because they are applied to an amount which refers to their value in the end of the maturity in a few years; some bonds only mature in 2052. This means that investors will lose more according to the amount they were expecting to receive in the end of the maturity.

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