Portugal's Resolution Fund seeks syndicated loan to inject into Novo Banco

Banco Espirito Santo SA em Liquidacao

04/05/2021 09:35

By Sergio Goncalves
    LISBON, May 4 (Reuters) - Portugal's state-backed Resolution
Fund wants to negotiate a large loan from a group of banks to
shore up the capital of lender Novo Banco, which was carved out
of the collapsed Banco Espirito Santo (BES).
    Such a cash injection is politically contentious, however,
partly because loss-making Novo Banco is 75%-owned by U.S.
private equity firm Lone Star. The remaining 25% is owned by the
Resolution Fund.
    "The possibility of a loan from a syndicate of banks of the
national banking system is on the table," Bank of Portugal
Governor Mario Centeno told a news conference late on Monday.
    Centeno, a former finance minister, did not provide further
details on the size or timing of the capital injection into the
country's third-largest bank. 
    "We must wait," he said. 
    The Resolution Fund is backed by all Portuguese banks which
pay annual contributions to finance it, and it can access loans
from the state.
    Lone Star acquired the majority stake in Novo Banco in 2017,
with the sale contract stipulating that the Resolution Fund must
inject up to 3.9 billion euros if certain losses occurred from
the sale of toxic assets inherited from the collapsed BES.
    The injection is meant to keep the bank's solvency ratios at
the required levels.
    During the same news conference on Monday, Resolution Fund
head Luis Maximo dos Santos said the fund did not have enough
funds to meet its obligations and was still "carrying out the
checks required to do all capital injections".
    According to dos Santos, negotiations with the group of
banks were "complex".
    Novo Banco has been offloading bad loans, real estate and
non-core assets under restructuring commitments agreed with
Brussels, and the resolution fund has already injected 3 billion
euros into the bank to cover those losses.
    Opposition parties are against injecting cash into Novo
Banco and last November blocked a government proposal for the
resolution fund to inject an extra 476 million euros.
 urn:newsml:reuters.com:*:nL8N2LL57X
    Opposition lawmakers fear Novo Banco could be benefiting
Lone Star by selling it non-performing assets at discounted
prices, which would inflate the lender's losses. Under the terms
of the sales contract, Novo Banco is not allowed to sell assets
to Lone Star or entities related to it.  urn:newsml:reuters.com:*:nL8N2FZ3QO urn:newsml:reuters.com:*:nL8N2LO5XL
    Novo Banco and Lone Star have denied any wrongdoing. 
    Lone Star has said it has never been part of any type of
transaction with related parties for the acquisition of assets,
including real estate assets, from the Novo Banco group.


 (Reporting by Sergio Goncalves; Editing by Catarina Demony and
Pravin Char)
 ((sergio.goncalves@thomsonreuters.com; +351213509204; Reuters
Messaging: sergio.goncalves.reuters.com@reuters.net))