Novo Banco launches debt swap to conclude tortuous sale

The so-called ‘good bank’ that emerged from Portugal’s ‘biggest ever bank collapse’ has launched a crucial debt swap today to boost its capital ratio.

Aimed to raise €500 million, Novo Banco’s sale to American private equity firm Lone Star depends on it.

Says Reuters: “The operation is a condition of the sale of 75 percent of Novo Banco to Lone Star, which was agreed in March. The government has said it hopes to conclude the sale by November”.

It is an essentially ‘dry’ report that explains nothing of the tortuous behind-scenes problems that have dogged Novo Banco’s existence from day one.

Multiple lawsuits from some very heavy hitters (click here) are not the only icebergs threatening the originally-dubbed ‘good’ bank’s troubled waters.

Over the weekend, senior banking figure and former Socialist minister Faria de Oliveira warned the bank carved from the ashes of BES could end up costing the country €10 billion.

This is due to the ‘exposure’ of the Resolution Fund – made up by the rest of the country’s banks – which the deal with Lone Star does not cushion.

Criticism of the sale is nothing new (click here), but this is the first time the price-tag of €10 billion has been mooted.

Faria de Oliveira is the president of the country’s association of banks.

Bottom line is that he and his members would like more information about Novo Banco’s sale, universally described as the “least of all evils” but nonetheless “ruinous”.

In a separate story today, Expresso reports that ratings agency Moody’s is “concerned with the risk presented by some Portuguese banks in being able to finance themselves in case of necessity”.

The agency suggests that “access to the market by Portuguese banks continues vulnerable to shocks”.

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