Portugal's Resolution Fund to borrow 475 mln euros to inject into Novo Banco

Banco Espirito Santo SA em Liquidacao

02/06/2021 06:58

By Sergio Goncalves
    LISBON, June 2 (Reuters) - Portugal's Resolution Fund said
it had agreed with a banking syndicate to borrow 475 million
euros ($580.36 million) to shore up the capital of lender Novo
Banco, which emerged from the ruins of the collapsed Banco
Espirito Santo.
    The loan is politically controversial as Novo Banco is 75%
owned by U.S. private equity fund Lone Star and because the
state-backed Resolution Fund, which has the remaining 25%, has 
injected 3 billion euros into the bank's capital since 2017.
 urn:newsml:reuters.com:*:nL8N2MR032
    "It is a credit line of 475 million euros, which can be used
by the Resolution Fund in 2021 and 2022, if necessary," the
fund's general secretary, Joao Freitas, told a parliamentary
committee on Tuesday.
    He said the loan, agreed on Monday with seven Portuguese
banks, matures in 2046 and has an interest rate equivalent to
that of 5-year Portuguese sovereign bonds plus 15 basis points.
Now, the loan interest rate is negative at -0.06%.
    The government gave a green light for the loan and said last
week the resolution fund would inject 429 million euros of the
475 million by year end.  urn:newsml:reuters.com:*:nL8N2LL57X
    The resolution fund is backed by all Portuguese banks which
pay annual contributions to finance it, and it can access loans
from the state and banks.
    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 in case of losses on the sale of
some toxic assets inherited from collapsed Banco Espirito Santo.
    The injection is meant to keep the bank's solvency ratios at
the required levels.
    On Monday, the bank reported quarterly profit of 70.1
million euros ($85.8 million) and a jump of 12% in net interest
income, after losses running into billions of euros since its
2014 rescue.  urn:newsml:reuters.com:*:nS8N2MU06A
    Chief Executive Antonio Ramalho told Reuters on Tuesday that
Novo Banco, finally purged of the toxic legacy it inherited from
the collapsed BES, is focusing on boosting profits to increase
shareholder value.  urn:newsml:reuters.com:*:nL2N2NJ1YD
 ($1=0.8185 euros)

 (Reporting by Sergio Goncalves; Editing by Clarence Fernandez)
 ((sergio.goncalves@thomsonreuters.com; +351213509204; Reuters
Messaging: sergio.goncalves.reuters.com@reuters.net))