Novo Banco offers between 1% and 6.84% interests to buy securities
Clients who accept selling securities they hold in Novo Banco can turn the money they earn from selling those securities into a fixed deposit. Interests offered stand between 1% and 6.84%.
Novo Banco has disclosed to the Portuguese Securities Market Commission (CMVM) the terms for their fixed-term deposit accounts’ offer to clients who accept selling the securities they hold in the bank. The interest rate for these deposits varies between 1% and 6.84%, depending on their maturity, according to the product at issued. As for the term of the deposits, it varies between three and five years, stated CMVM.
The generosity of the offer will be determinant for compensating the losses clients will suffer, since the debt exchange operation implies losses for bondholders which go from 10% to 90%. By remunerating deposits, investors can profit from what they will receive for the debt they hold.
The prospect sent to CMVM explains that these are fixed-term deposits, whose interests are annual and payed only after a set period has gone by. “A depositor may withdraw a deposit in whole or in part at any time, but if a depositor withdraws any amounts prior to the end of the fixed period they will not be entitled to, and will forgo benefit of, ant accrued interest in respect of the amount withdrawn”, is one of the rules.
Each beneficial holder will have to “deposit the full amount received” for the purchase of the securities (excluding matured interests) in order to be able to benefit from these terms. In addition, CMVM warns, depending on the amount invested in the deposit and the nature of the depositor, “any such deposit may not benefit, in whole or in part, from the Portuguese Deposit Guarantee Scheme”. In addition, deposits will only be available for two weeks after the liquidation offer.
In the terms and conditions published this Tuesday in CMVM, it is clearly specified that “for the avoidance of doubt”, these term deposits “do not form, and should not be construed as forming, part of the terms of, or consideration for, the Offers or the Proposals”.
As for clients who hold securities maturing in April and May of 2019, Novo Banco aims to purchase these bonds for 82% of their nominal value, meaning there is an 18% discount. In this case, losses can be compensated with a three year deposit paying an annual 6.84% interest rate. As for securities maturing in June 2021, Novo Banco proposes an 11% discount in comparison to the nominal value. This way, these bondholders can make a five year deposit with an interest rate close to 6.5%.
The idea behind this is to decrease the interest rates on deposits as potential losses also decrease. The least attractive deposits will be offered to bondholders of longer maturities. The securities only maturing between January 2043 and 2052 will be able to make five year deposits with a 1% interest rate.
