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Novo Banco sale document must be handed over to investors

novobancoshinylogoThe Lisbon Administrative court has ruled that the Bank of Portugal must disclose the sale agreement covering Novo Banco's sale.

The agreement details will not become public knowledge as only those international funds that invested in Banco Espírito Santo (BES) bonds will have access and even then, parts of the agreement that the Bank of Portugal considers confidential, will be withheld.

The request for access to the Novo Banco sale agreement and eventual transfer to the Lone Star vulture fund, was made by 19 international investment funds that had bought BES bonds.

These are the investments that were held by Novo Banco after BES went bust but were switched by Bank of Portugal governor, Carlos Costa, back to the 'bad bank' BES, thus collapsing their value. Costa said he would not take this course of action, but lied and shifted the liability from Novo Banco's balance sheet in preparation for its unencumbered sale.

On December 13th, the Lisbon court instructed the Bank of Portugal and the Resolution Fund "within 10 days" to hand over copies of the sale agreement to the investment funds, with any delicate passages redacted.

To its credit, the court decided that Carlos Costa must justify any such deletions that he considers confidential – which will be most of it as the Resolution Fund and the Bank of Portugal already have said that the entire contract is confidential as it contains "information of a highly sensitive and confidential nature about the buyer's internal workings and about Novo Bank itself.”

The court judges say that even they do not know what is in the contract, but admit that there may some sensitive parts that are best kept confidential.

The investment funds, currently €700 million down on the bonds deal, already have another lawsuit in progress in which they challenge the resolution applied to Banco Espírito Santo which led to the creation of Novo Banco. The court considered it important for the fund managers to be aware of how the sale process was handled as this might help them mount their case.

The purchase and sale agreement for Novo Banco was signed at the end of March, 2017 and the deal went through on October 18th. Lone Star was handed 75% of Novo Banco’s shares and agreed to inject €1 billion, in two stages.

The remaining 25% of Novo Banco’s shares, and hence its liabilities, are still held by the Resolution Fund which is managed by the Bank of Portugal.

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+1 #5 Plain Speaking 2017-12-25 12:04
On a more positive note it does show that the Portuguese legal system, although painfully slow, is relatively independent from political pressure.
+5 #4 Peter Booker 2017-12-22 09:13
The difficulties in the banking sector in Portugal have arrived a bit later than in Britain. Northern Rock and HBOS foundered in 2008, and I am not sure that current British regulation is better placed to prevent further collapses. Portugal´s pot is no blacker than Britain´s kettle.
0 #3 Darcy 2017-12-21 20:05
How is it that Portugal, unfortunately draws in the yapping and negative types as seen by the comments so far.
+2 #2 Damien 2017-12-21 15:17
International pressure of any kind put on Portugal is welcome to those of us who are foreigners in Portugal. It makes the Portuguese elite briefly stop and think. This being to honour banking contracts and it usefully has teeth. But will it, in the long run change anything, making banking in Portugal under Portuguese non-regulation any safer ?
Like animal welfare, the environment and equal rights for all amongst so much else that is regulated in developed countries - will it just be a temporary blip, some brief pretence of change but the old practices continue as ever?
+5 #1 nogin the nog 2017-12-21 12:01
With a crook at the wheel, One can only assume the rest will be lip service. In fact mal practice is in trenched so deep that only a fool would place any trust in the out come ..

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