Morgan Stanley creates a financial vehicle that unblocks the sale of Novo Banco

  • ECO News
  • 28 September 2017

The bank Morgan Stanley found a solution for investors like Pimco, who could not have their money on non tradeable assets - such as Novo Banco's deposits.

It was Morgan Stanley that found a solution which could help unblocking the sale of Novo Banco to Lone Star. The North-American bank is behind the financial vehicle which made the deposits offer from the Portuguese bank viable to many investors, including the fund Pimco, which has agreed to sell its bonds.

Many bondholders from Novo Banco were not able to have their money in non tradeable assets — and deposits are included in this category. Therefore, those creditors were no able to sell their bonds and deposit the money in Novo Banco, which meant they could not accept the debt exchange offer, whose deadline is October 2nd.

This technical problem has been overcome, as a source from Pimco told ECO this week. And, according to sources close to the process told Bloomberg, it was the Morgan and Stanley bank which presented a solution to investors. This bond repurchase operation is key in finally selling Novo Banco to Lone Star.

Under this structure, deposits will be held and securitized into tradeable bonds by a special financial vehicle called Emerald Bay.  Morgan Stanley will charge a commission to investors who decide to place their deposits in this vehicle; Novo Banco was not directly involved in creating this vehicle, a source stated. Neither entity involved in the operation made any comment to Bloomberg.

Novo Banco gathers this Friday, once again, with bondholders. When the last general assembly took place, largest investors were not convinced and didn’t accept the exchange proposal, meaning that only 37% of the goal was met. There needs to be enough quorum this Friday in order to be able to reinforce NB’s capitals in 500 million euros and finally sell the bank to the North-American fund Lone Star.

Unlike Pimco, other investors, such as Xaia Investment fund, have rejected the operation, meaning the final result of the offer remains unknown.