Novo Banco’s debt rockets. Those who didn’t contribute to the solution are gaining 30%

  • ECO News
  • 17 October 2017

NB's sale to Lone Star is imminent after the success of the debt repurchase. But those who rejected selling their bonds on the bank are benefiting from the strategy: securities rocket in the market.

Those who did not sell the bonds they held in Novo Banco during the debt repurchase offer are gaining from the appreciation of the securities in the market. Given the imminence of the sale of the transition bank to the North American fund Lone Star, the value of the securities is rocketing.

Some investors announced from day one that they were not going to take part in the debt exchange operation needed to conclude Novo Banco’s sale to Lone Star. Although this strategy could compromise the future of the bank, these creditors hoped to gain from the valuation of bonds, which is exactly what happened with several bond lines the bank couldn’t absorb (such as, for example, the bond line with a 3.88% coupon maturing in 2035).

On September 26, after Pimco said they would accept the bond exchange, at the end of the session, these bonds were worth 67.485 euros. Those same titles are now negotiating at 88.175 euros, a 30% increase that reflects the relief from investors about a possible liquidation or new resolution of Novo Banco. Currently, this line in the bond market is worth 170 million euros.

“The outstanding Novo Banco bonds surge as the company should look much better after the sale to Lone Star”, Jochen Felsenheimer, director of the German fund Xaia Investment, told ECO. In addition, he stated: ” I think this is the reason as all outstanding bonds jumped the day after the results from the initial tender level to a higher one”.

This bond line rockets with the success of the debt repurchase offer

Source: Bloomberg

Several lines continue negotiating (and valuing), but now with a smaller liquidity, after Novo Banco assured 4.74 billion euros in the debt repurchase operation in order to save 500 million euros.

That was the case with the zero coupon bonds maturing in 2052. According to Bloomberg, these titles were worth 12.8 euros in the end of last month, and are now being traded by investors at 16.9 euros, a 32% increase. There is a total of 390.9 million euros in bonds from this series.

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