“Institutional investors will not risk the sale of Novo Banco”

  • ECO News
  • 18 September 2017

Novo Banco's sale is in its final stage. Ricardo Mourinho Félix, interviewed by ECO, stated that investors are rational and, therefore, will not risk the conclusion of this process.

In an interview to ECO, the Portuguese secretary of state Assistant and of Finance Ricardo Mourinho Félix, the right arm of Finance minister Mário Centeno, stated he believes in the success of the bond exchange operation. And what if it fails? “The alternative scenarios are clear”: an orderly winding-up of the bank.

When asked about BCP’s legal proceeding against the Bank of Portugal and the Resolution Fund because of the 3.9 billion guarantee given to Lone Star to purchase Novo Banco, Mourinho Félix states the proceeding does not put the sale of the bank at stake, so “the sale process will continue”.

“BCP made public that by taking on the 3.9 billion responsibility, the Resolution Fund was imposing that responsibility to the rest of the financial system, which is not adequate and should not be legally assumed”, he further states. The State secretary also disclosed that Lone Star did not request any explanations from the Government on this proceeding, but might have done so directly to the Bank of Portugal.

"We, the Government, are not working on any of these scenarios, we are fully committed to the plan A and to the success of this operation.”

Ricardo Mourinho Félix

State Secretary

Ricardo Mourinho Félix explains that the Government is now dealing with the repurchase of Novo Banco’s senior bonds: “typically, institutional investors wait until the last minute to make a decision [of selling those bonds], but they know their importance for the process and know that a non-participation puts at stake the conclusion of the sale process to Lone Star“. The State secretary also states that investors know that “the failure of the sale has serious consequences that affect everyone, but also them”.

When asked if the Government has a plan B in case creditors do not accept the proposal of repurchasing their bonds, Mourinho Félix explains the alternative scenarios are clear: “the European Commission’s commitment letter is very clear on the so called orderly winding-up of the bank, but this is a process with many implications; another possibility European entities may surely consider is a mechanism close to a resolution”.

However, Mourinho Félix states: “We, the Government, are not working on any of these scenarios. We are fully committed to the plan A and to the success of this operation, and we have expressed our commitment to the Bank of Portugal that we are doing everything possible for the operation to be successful”.

As a conclusion, he states: “We are convinced that institutional investors are rational and will accept the bond exchange and not risk the sale process of Novo Banco”. And if they do risk it? “There will be serious consequences”.