Pimco ‘stays’ in Novo Banco, but continues to boycott Portugal

  • ECO News
  • 27 September 2017

Pimco accepted to sell their bonds to Novo Banco and become a depositor. However, they will not make new investments in Portugal until there is an agreement with the Bank of Portugal over BES.

Pimco’s decision means the sale of Novo Banco is closer to be concluded. Nonetheless, the fund is keeping Portugal embargoed. Paula Nunes / ECO

Pimco will accept the offer to repurchase Novo Banco’s bonds, but they will not make any more investments in Portugal, either for private or public debt. This boycott will continue until the fund solves its dispute with the Bank of Portugal over the transfer of bonds from Novo Banco to the insolvent estate of Banco Espírito Santo (bad bank BES) in December 2015, ECO ascertained.

This Friday, Novo Banco is holding a decisive general assembly with its bondholders, after the offer to repurchase the transition bank’s debt was accepted by one of the largest investors, Pimco. Although there are some loose ends on the proposal of Novo Banco, ECO was able to ascertain with a source from Pimco that a “technical” solution has been found, allowing the investment fund to accept the terms of the offer.

This favorable decision opens the door to the sale of the transition bank to the North American fund Lone Star, more than three years after BES’ resolution measure.

Boycott to Portugal will continue

With Pimco’s favorable vote, the Bank of Portugal, the Finance Ministry and the Resolution Fund are finally closer to seeing Novo Banco’s sale process being concluded. But Pimco’s decision is far from being a sign of peace with Portugal: the boycott of this important fund will be maintained about Lisbon, namely about the public debt, ECO knows.

This tug-of-war with the Portuguese authorities concerns the five series of bonds assessed at 2.2 billion euros’ transfer from Novo Banco to the bad BES, in the end of 2015. According to a source from the fund contacted by ECO, the proceeding in the Portuguese courts hasn’t had any development for the past six months. Those responsible for Pimco say they hope to see this issue solved in their favor and are even patient about the timings of the process: “We have a strong case”, the fund emphasizes. But until the problem is solved, Portugal will continue being embargoed.

“As for our old investment, we will try to maximize it…”, that source told ECO. “But the decision is clear: we will not normalize our investment policy in the country until we find a solution for the bonds we have in BES”.

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