Novo Banco faces up to bid by “great vampire squid” to win back €835 million

Battle lines are being drawn up in the fight launched by investment bankers Goldman Sachs to wrestle back €835 million loaned to an offshoot of BES weeks before the private bank went belly-up.

Novo Banco – the “good bank” that morphed from the disaster, and is now up for sale to the highest bidder to recoup a €3.9 billion loan by Portuguese banks – is adamant that the fight be waged through the Portuguese courts.

Goldman Sachs – notoriously described as “the great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money” – has very different ideas.

It wants the case to be heard in the UK, because it fears that a hearing by Portugal’s judiciary could take up to 16 years to be resolved, claims Bloomberg.

Repeating the story for the Portuguese press today, negócios online says Goldman Sachs’ lawyers are claiming the loan – made by one of its “investment vehicles” Oak Finance – “is subject to English law and the jurisdiction of the English courts”.

It is a position refuted by Novo Banco, which is adamant that the loan should not be taken on board, as it would badly affect its saleability. Backed by the Governor of the Bank of Portugal, Novo Banco’s baseline position is that there is no legal requirement for it to honour the massive loan, as it is now conveniently tucked away in the “bad bank”.

BdP chief Carlos Costa also claims Goldman Sachs is partly to blame for lending money to a bank which it knew, at the time, was in “a delicate financial situation”.

The debate is currently being heard by legal assessors and it depends on whose lawyers are smarter as to where this politically “hot potato” goes next.

Joining forces with Goldman Sachs in the fight to get the case heard in UK is New Zealand’s Superannuation Fund, which had €150 million invested in the disastrous Oak Finance loan.

Investors’ main beef lies in the fact that they were told, they claim, back last summer when BES imploded that their loan was ‘safe’ in that it would pass to Novo Banco.

Months later, when the rest of the world was busy getting ready for Christmas, Novo Banco’s administrative council suddenly announced that the debt would not, after all, be attributed to the good bank. Instead it would go join the legion of toxic assets owned by the bad bank – currently at the centre of a massive police investigation which saw the owner of bank, Ricardo Salgado, put under house arrest last Friday (click here Former BES boss under house arrest after 12-hour court grilling)

By NATASHA DONN [email protected]