The Bank of Portugal, in negotiations with Chinese insurance giant Fosun, announced yesterday that it will release information "in due course" on the result of talks to close the sale of Novo Banco.
Last night the deadline passed for the end of talks with bidder #2 - Fosun. The Bank of Portugal has three options left: to sell to Fosun at the price asked, to start negotiations with US venture capital fund Apollo, or to postpone the sale and re-run the competition when Novo Banco has resolved the issues that is preventing its sale.
What has become clear is that the €4.9 billion the treasury needs to secure to pay off the money thrown at the problem created when BES went bust, will not be forthcoming.
Pedro Passos Coelho said on Friday that "taxpayers did not lose money with Novo Banco, nor will they,” although at the offer prices being discussed, it is hard to see how receiving less for Novo Banco than was pumped into it can be called anything but a loss.
"In due course the central bank will announce the results of the negotiation process which it is carrying out to sell Novo Banco," the Bank of Portugal said in a statement.
Diario Economico reported that the bid by Fosun was too low to lead to a sale, reporting that Fosun would only pay €1.5 billion for Novo Banco, the "good bank" carved out of the collapse last August of Banco Espírito Santo.
Novo Banco was created after the €4.9 billion bailout of BES and authorities are eager to recover as much of this amount as possible in the sale.
Under the terms of the bailout, Novo Banco must be sold within two years but the period can be extended by periods of one year if it is deemed ‘in the public interest.’
Buyers have been only too aware of the fragile state of Novo Banco’s financial situation and its ill-defined liabilities that even its auditors admit are impossible to quantify with the degree of accuracy needed to satisfy a serious bidder. Bids have been correspondingly low.
It looks likely today that the sale of Novo Banco again will be postponed which may mean some deft PR footwork will be needed by the Minister of Finance to balance the books for this year’s State Budget.
Minister Maria Luís Albuquerque said that she does not have a "particular concern" about the fact that the state loan of €3.9 billion to the Resolution Fund may not be returned this year as scheduled as there are more than adequate reserves. This did not answer the question on the affect of a 'no sale' on the State Budget.
The government issued a statement last week saying that any sale of Novo Banco at below the figure needed to pay off the emergency funding needed will not affect the State Budget. This is debateable as today the Technical Unit for Budget Support (UTAO) said the government will have to issue more debt, or use reserves if Novo Banco is not sold this year “in order to satisfy the net needs of state funding."
This will be on top of the government having already over borrowed this year. The Unit pointed out today that the state funding needs for the first seven months of the year reached €8.9 billion, up from €7.3 billion in the budget.
Of further concern to the treasury is that the full impact of the Novo Banco support operation, should it not be sold, will be published on October 1st, just three days before the general election.
The President of the Republic, Cavaco Silva, commented today that the Bank of Portugal will make a decision "that best defends the national interests" and everyone should "let the Bank of Portugal do its job" in negotiations to sell the bank. This is despite failing to sell it to Anbang, probably failing to sell it to Fosun and facing the catastrophic prospect of selling the bank to a US venture capital fund.
Economy Minister Pires de Lima said that any postponement of the sale of the New Bank is the responsibility of the Bank of Portugal and that the bank is "only worth selling at the right time and at the right price," adding that he has absolute confidence in the Bank of Portugal to handle the sale.
