Brussels approves state aid. Novo Banco’s sale can move forward

  • ECO News
  • 11 October 2017

After the European Commission concluded the sale of the bank to Lone Star does not distort competition, Brussels approved the state aid. The sale of Novo Banco to the North American fund can proceed.

It is now official: the European Commission gave the green light that was missing so that Novo Banco could be sold to Lone Star. After Brussels concluded that the acquisition does not raise any issues concerning fair competition, since the transition bank and the North-American fund’s activities “do not overlap in the Portuguese banking”, European authorities have now given their “all clear” to the state aid. The same is to say they approved the 3.9 billion euros’ guarantee from the Resolution Fund to safeguard the side bank.

“Portugal has decided to sell Novo Banco to a new private owner, who will restructure the bank to return it to viability. We have approved Portugal’s plans to grant State aid to Novo Banco under EU rules”, the Commissioner Margrethe Vestager stated in a press release. “Now it is important that the new owner successfully enacts the plan, so that that the bank can support the Portuguese economy”, she added.

Portugal has decided to sell Novo Banco to a new private owner, who will restructure the bank to return it to viability. We have approved Portugal’s plans to grant State aid to Novo Banco under EU rules, based on the bank’s far-reaching restructuring plan and measures taken to limit distortions to competition. Now it is important that the new owner successfully enacts the plan, so that that the bank can support the Portuguese economy.

Margrethe Vestager

European Commissioner for Competition

According to the document, this will “allow the new private owner to launch its ambitious restructuring plan aimed at ensuring the long-term viability of the bank, while limiting distortions to competition“.

The European authorities also state that they assessed three issues concerning state aid. Firstly, “the competitiveness of the sales process of the bridge bank”; then, the “Portuguese plans to grant additional State aid to finalise the BES resolution and bridge bank sale”; and finally, “the viability of the entity resulting from the sale of the bridge bank”.

It was in July that the European Commission gave their first approval of Novo Banco’s sale. In this case, the approval concerned European rulings about mergers. The European authorities concluded that the acquisition did not raise any questions because the transition bank and the North American fund have “no overlapping activities in the Portuguese banking”.

The sale of the transition bank overcame another obstacle: it achieved a 500 million euros’ saving in the senior debt exchange, a key condition for the sale to Lone Star to be followed through. The bank headed by António Ramalho stated creditors accepted to exchange 4.74 billion euros in bonds. All that is left now is for Lone Star’s business plan to be approved, which should happen sooner rather than later.

PUB