Moody’s gives Novo Banco sale damning thumbs-down

Adding to the furore over government plans to “sell” Novo Banco to US “vulture fund” Lone Star, ratings agency Moody’s has slashed the bank’s already abysmal ratings to the eighth level of “rubbish”.

Negocios online explains Moody’s was prompted by the ‘€500 million voluntary bond swap’ aspect of the deal, which it says will provoke losses for senior bond investors concerned.

Reducing Novo Banco’s ‘senior bond rating’ to Caa2, Moody’s has also cut the rating that measures the bank’s “intrinsic solidity”, says the site, while ‘deposit’ ratings have fared slightly better, staying at Caa1 but remaining under what is called in financial circles “negative vigilance”.

This is just the latest broadside to batter the ‘deal’ laid before the country as everyone clocked off for the weekend, last Friday.

Other than establishment noises that the sale is “the least bad option” available, fewer and fewer quarters appear to be able to swallow it.

A heated debate in parliament yesterday saw Bloco de Esquerda’s Mariana Mortágua explaining more of the flawed mathematics involved.

“In the worst case scenario, Lone Star will pay a billion euros to end up with a good bank, and the State will pay €7.79 million to end up with no bank at all”, she said.

The €7.79 million includes the €3.9 that the State’s Resolution Fund initially injected into the bank, and the rest is a figure for the “public guarantees” that the “government assured would never exist”, she explained.

Almost a week since the sale agreement was announced, the country still has no idea whether it will in fact move forwards (click here).

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