The Chinese multinational, Fosun Group has expressed formal interest in buying Novo Banco.
The company that successfully bought Caixa Seguros from the Portuguese state for around €1 billion joins Banco Português de Investimento and Santander in the line-up before bids are invited.
Fosun, which also owns Portugal’s Fidelidade and Luz Saúde, formalised its entry into the race on Friday.
The three bidders are being offered Novo Banco without its BES Investimento subsidiary which already has been sold to Haitong, another Chinese company, for €379 million.
Any further entries must be received by the end of December.
There are four phases to the sale: expressions of interest, non-binding proposals, binding proposals and the final decision.
The ‘attractiveness of the financial offer’ is the main criterion for choosing the winner i.e. the highest bid.
Secondary considerations will be the buyer’s willingness to purchase all of the assets on sale, the content of the buyer’s strategic and development plans, and the overall impact of the transaction on competition and the stability of the current banking sector in Portugal.
Deutsche Bank has published a research note that points out the attractiveness of Novo Banco to current (solvent) Portuguese lenders, or to those from Spain.
The debate over Novo Banco’s assets has focused on their potentially fluid nature. On the face of it, Novo Banco has €72,465 million in assets, equity of €5.6 billion and a 9.2% solvency ratio. This is according to a statement released on December 3rd.
Customer deposits were listed at €25.1 billion and the total portfolio of gross loans to its customers were €43.8 billion, of which €31,500 million were corporate loans (72%) and €12.4 billion were loans to individuals (28%).
The problem lies with the Bank of Portugal’s division of good loans from bad loans when in August it split up the bust Banco Espírito Santo into good bank/bad bank (Novo Banco/BES).
There are lawsuits from around 20 international funds seeking to overturn the division of BES into the good bank/bad bank format. All are former bond holders in BES.
All feel duped by the Bank of Portugal and want access to the information that was used by the bank when it shoved their money into the bad bank, having just said that all was well with BES.
One key depositor in the old BES, Goldman Sachs, claims to have statements from the Bank of Portugal that the €584.3 million it spent on financing BES via Oak Finance in Luxembourg had been transferred safely to Novo Banco from the wreckage of BES. This is not the case and Goldman Sachs is incandescent that the Bank of Portugal lied to it and that Goldman's money is now at serious risk of heavy dilution, lumped in with the toxic assets at BES.
If Goldman Sachs and other depositors were misled by the Bank of Portugal, the resulting legal action may entail the transfer of liabilities from BES over to Novo Banco. The Novo Banco asset sheet will look significantly worse as a result.
