The Resolution Fund has until December 10 to acquire the rights to convert the tax credits into shares corresponding to about 3% of the bank's capital.
The state is preparing to enter Novobanco’s capital, where it may take a 3% stake later this year, following the tax credits granted in 2015. This will happen if the Resolution Fund does not acquire the rights to convert the tax credits into shares in the coming weeks. Which seems to be the most likely scenario, affecting the 25% stake that Máximo dos Santos’ fund has in the bank.
Novobanco has just released the notice on the period and conditions to exercise the conversion rights relating to the 2015 financial year, a period for which the tax authorities approved tax credits of €153 million.
As a result of these tax credits, as established by the special deferred tax assets (DTA) regime, the bank led by António Ramalho had to set up a special reserve of €168.9 million with the Bank of Portugal – corresponding to the value of the tax credit with a 10% surcharge.
It is this amount that is now about to be converted into Novobanco shares, representing a stake of around 3% of the bank’s share capital.
According to the bank’s notice, between November 23 and December 10, the Resolution Fund will be able to exercise its “right of preference” over 154 million conversion rights allocated to the state (in favour of the Directorate-General of Treasury and Finance) at a unit value of €1.0904. To do so, the fund should express its will to Novobanco by filling out and signing a document made available by the bank. Afterwards, if it exercises its rights, it will have to pay immediately.
In that way, the fund led by Máximo dos Santos would avoid its 25% stake in Novobanco being diluted, as the sale agreement to Lone Star in 2017 defined that the DTAs’ conversion to equity would never affect American’s 75% stake.
On the other hand, it was also agreed that Lone Star would retain a 75% stake in Novobanco, regardless of the new shares issued in connection with the conversion of the tax credit rights.
In other words, only the Resolution Fund has a voice in this process. But it is most likely that the fund will not show interest, as Máximos dos Santos predicted last May during a hearing before the parliamentary commission of enquiry into Novobanco. “We have not yet been notified to exercise our right of preference, which we probably would not do,” he told members of parliament.
Neither the bank nor Lone Star wished to comment on the issue. The Resolution Fund and the Ministry of Finance did not respond by the time the article was published.