The Bank of Portugal has until Monday night to decide whether to accept the proposal made by Anbang Insurance to buy Novo Banco.
Negotiations are said to be at a standstill with the Chinese offer lying on the table to the horror of the Bank of Portugal which needed €4.9 billion, not the €3.5 billion on offer with concerning conditions attached.
The recent Chinese currency devaluation will not have helped Anbang’s position and the collapse of the Chinese stock market will not have boosted confidence in selling the business to a group affected by its local market conditions.
Then there is Apollo Global Managament, the US company that was asked by the Bank of Portugal to step back as the negotiations to sell Novo Banco were to be exclusively with Anbang.
The Apollo offfer is lower than that of the Chinese but the Bank of Portugal may switch to Apollo if tomorrow it rejects the Anbang bid.
Apollo has no interest in running a bank but may behave as many venture capital companies do and cut costs, mortgage the banks assets, sell off its loans, pay itself a one-off stonking dividend and then sell the shell of the now heavily indebted company for whatever it can get while turning a massive profit for its avaricious shareholders.
The Bank of Portugal team is well aware of this type of commercial behaviour and whatever the assurances from the Apollo team, this is the most liklely outcome.
The Anbang price has been the problem - it's just not enough to get ecveryone off the hook.
The Chinese cleverly got themsevlves into a sole negotiating position and later announced that if Novo Bancio needed more capital, this should come off the agreed sale price.
The Bank of Portugal team has been stumped ever since. Does it reduce the selling price to the Chinese if a European ‘stress test’ shows a further capital injection is needed for Novo Banco, or does it now go to Apollo and start negotiations to sell at a lower price than the full Anbang offer?
The resolution fund injected €4.9 billion into Novo Banco as the Bank of Portugal tried to sort out the mess left by Ricardo Salgado as BES collapsed.
Much of this money was from the treasury, aka the taxpayer, and the Finance Minister is determined to have it all back to balance her figures this year, or by next August at the latest.
The whole deal is unravelling and is likely to show the Bank of Portugal’s management as inept negotiators. If they go the full term and re-run the sale process up to August 2016, this deadline set by parliament will serve to depress any offer prices.
The current deadline was at least a good one but if negotiations now fail with Anbang and Apollo, there will be few remaining reasons to keep Carlos Costa, the Bank of Portugal’s governor, in his position.
In a rather downbeat statement yesterday, the Prime Minister Pedro Passos Coelho said the proceeds from the Novo Banco sale will be "the best that the Bank of Portugal can achieve."
Sadly for the taxpayer, Carlos Costa’s best seldom has been enough.
