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Last minute hiccups in allegedly ‘ruinous’ sale of ‘good bank’ Novo Banco

Even at the 11th hour, the ‘ruinous’ sale of ‘good bank’ Novo Banco – the financial institution created from the wreckage of BES – appears to be floundering.

Público reports today that despite potential buyers China Minsheng and Lone Star still being in the running, neither have ticked all the necessary boxes – while the Resolution Fund that has to opt for either one or the other has failed to decide on a “concrete entity”.

Meantime, a new legal bid to block the sale altogether has been lodged at Lisbon’s administrative court by lawyers representing 232 ‘small investors’ – including emigrés who were not party to deals announced earlier this month (click here).

The way ahead, as it has been since the outset, is distinctly precarious.

Expresso explains that “there are many risks, principally due to the effect on the banking sector and taxpayers”, as whatever deal is brokered, it will fall far short of the billions ploughed into Novo Banco in 2014.

For the time being, China Minsheng has failed to ‘come up with the goods’ to pay for its proposed investment, while Lone Star is demanding guarantees over a possible devaluation of the bank’s worth.

Público suggests the devaluation could run to 25%, and goes as far as to say the government could still end up with the prospect of “nationalisation or liquidation” if no final deals are reached.

Into the mix comes the new ‘legal embargo’ which means to be a “real test of Portuguese justice”.

Lawyer Miguel Reis, representing the 232 investors, told Público that “if the sale is allowed there is no justice” and the State “will end up paying much more than it would have paid if Novo Banco was delivered to its creditors, through privatisation”.

Público does explain, however, that “if the bank has not been bought or nationalised by August 2017” liquidation could save taxpayers a great deal of grief.

It could trigger “a systemic crisis”, writes journalist Cristina Ferreira “but the measure would not have repercussions on the deficit” and, “in theory” it could “protect Portuguese taxpayers”.

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