Approvals from the European Commission and the European Central Bank is needed before the ownership of Novo Banco can be transferred to Nani Holdings,* a company set up by US vulture fund Lone Star fund.
The sale is almost complete, but for these two approvals which will depend on EU rules on state aid and a restructuring plan that Lone Star has presented to ensure Novo Banco’s long-term viability.
"We are in constructive contact with the Portuguese government on the final plan to restructure Novo Banco, which needs to ensure that the bank is viable in the long-term," said a European Commission spokesperson today.
The Insurance Supervisory Authority also is involved but has approved ownership by the US fund. This was necessary as Novo Banco has holdings in two insurers and a pension fund manager.
Another condition for the transfer of ownership is Novo Banco’s liability reduction operation. The initial expectation was that this would be a debt swap, but the bank offered to repurchase debt in order to save €500 million in interest. This operation was launched on 25 July and ended on Monday with the expectation that this will have been successful.
Novo Banco is owned by the Resolution Fund which is a financial structure owned by Portugal’s banks and managed by the Bank of Portugal.
In March, an agreement in principal was signed between the Resolution Fund and the Lone Star Fund, which stated that 75% of the bank will be transferred, with 25% remaining with the Resolution Fund.
Lone Star agreed to inject €1,000 million into the bank, of which €750 million will be available on transfer and the remaining €250 million by 2020.
If all conditions are met, the sale of the Novo Banco to Lone Star is expected to be completed later this month despite the Bank of Portugal denying two bidders the opportunity to pay up to €3 billion for 100% of the bank.
UPDATE Wednesday 3rd October
Novo Banco is to make an early refund on €4.74 billion of bonds for just under €2 billion, 57% of face value.
* Nani Holdings is a Portuguese company headquartered in Parque das Nações, Lisbon, and was created on March 23rd, 2017 under the name of Cosmikcrown SGPS. On the 28th of that month, the day before the signing of the New Bank's purchase agreement with the Resolution Fund, the company was renamed Nani Holdings.
Initially, Nani Holdings had members of the ABBC law firm, which legally supports Lone Star. However, in June, the company was led by Tanya Sheridan, also a lawyer and vice president of Lone Star International Finance.