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Choice of Lone Star for Novo Banco “the least bad”, says former finance minister

As the dust settles on the Bank of Portugal’s “decision” over the sale of Novo Banco, pundits are starting to read between the lines.

The “choice” of private equity firm Lone Star with which to continue negotiations – possibly going right back to basics, says Público – is certainly not an issue of making the best choice of offers on the table, former finance minister Manuela Ferreira Leite has told TVI24.

It is much more a case of Lone Star’s offer being “the least bad”.

But whether this means Lone Star will ultimately win through to take over the so-called ‘good bank’ that no-one appears delighted to pay very substantially for is a whole different issue.

According to negocios online the communiqué issued by governor of the Bank of Portugal Carlos Costa is just as important for what it didn’t say, as for the little that it did.

Taking it point-by-point, financial journalists explain that BdP’s decision was based on “elements available at this date”.

Lone Star was referred to as “the potential investor” – neither the ‘winner’, nor the investor that BdP will be recommending to the government (the entity that ultimately decides).

Costa simply described Lone Star as the “best placed entity”, bearing in mind offers BdP has received so far, explained the website.

There is now going to be a “deepening of negotiations” (Público has suggested they will go back to square one), but there was “nothing said about this deepening” being exclusive, says the website, “which opens the door to parallel negotiations being held with other candidates”.

“In practice, the Bank of Portugal is saying that this investor now has the opportunity to improve its proposal, above all, taking into account the (government’s) preoccupation with eliminating conditions of the offer that could have an impact on public accounts”.

Writers of the article dubbed “What the Bank of Portugal announcement on Novo Banco says between the lines” stresses that “if Lone Star does not take advantage of this opportunity, the BdP could choose another potential investor as the best placed entity”.

And so, the ‘decision’ – a bit like the long-awaited reply from the Iraqi embassy this week – was something of a non-event.

Giving her own take in one of the regular commentary slots she gives TVI24, Manuela Ferreira Leite said she has no doubts at all about the ‘end result’.

“I have no doubts that nationalisation is one of the elements being considered”, she said. “If it is good, or bad, I would say that what is necessary to see here is that which is the least bad”.

Ferreira Leite stressed that the resolution of Novo Banco “will never be good”, and that even though she is against “ideologically against” nationalisation per se, it may be the answer here until a much better solution becomes available.


Portugal first became aware of Lone Star Funds in April 2015 when the US group that invests in distressed assets sealed the “biggest property deal” of all time in the Algarve, purchasing the ‘paradise development’ of Vilamoura for a record €200 million.

It sounded great on paper, but the truth behind the deal was less star-spangled.

Former business association leader Vítor Neto said at the time that Vilamoura was sold “just in time”, and at a bargain-basement price considering its pre-crisis tag.

It was debatable, he said how much longer the resort could have survived without “an intervention to breathe some life” into it and “revive planned investments” – like the controversial Cidade Lacustre project which involves the artificial flooding of thousands of hectares of agricultural land to create a deluxe lake-city.

Since then, Lone Star has announced that it is seeking a “billion dollar investment to double the size of Vilamoura” (click here), but nothing more seems to have happened.

In the meantime, the firm bought ailing Dolçe Vita supermarkets in Porto, the Douro, Coimbra and Lisbon, paying about €40 million for each one, and selling them months later for €200 million.

Right now, aside from its interest in Novo Banco, Lone Star is said to be looking for “more businesses in which to invest in Portugal”, particularly in Lisbon and Porto.

The search, reports RTP, “centres on land for the construction of luxury properties”.

Founded in 1995 by John Grayken, “a millionaire opportunist” who has made “a fortune with the mistakes of others” (Expresso), Lone Star Funds is now believed to have assets totalling 60 billion dollars.

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Photo: Less than enthusiastic about Lone Star Funds’ bid for Novo Banco, former finance minister Manuela Ferreira Leite said the Portuguese should be given information on what the company plans for the institution long-term.