On the same day that final bids for its long-awaited sale are due, Novo Banco has heard that it has lost a key battle that effectively reduces its value even further.
British courts have ruled that the wrangle involving €835 million loaned to the bank’s predecessor BES weeks before BES went bust cannot be shuffled away into the Portuguese judicial system.
It’s a decision that will exasperate both Novo Banco – desperate to sell to the highest bidder as fast as possible – and the Bank of Portugal (BdP), which is just desperate for good news generally.
As Bloomberg financial website explains, the Portuguese plan to get the whole case “dealt with” on national soil could have held it up for as many as 16 years due to the habitual sloth of Portuguese justice.
A hearing in UK will see decisions made much more swiftly – particularly considering that plaintiffs include Goldman Sachs, one of the largest investment banks in the world with recourse to some of the best lawyers in the business.
Explained by national media ad infinitum since last Christmas when BdP ‘changed its mind’ over which bank should repay the loan – the ‘good’ Novo Banco, or the ‘toxic’ bankrupt BES – Goldman Sachs simply wants its money back. It has not been dubbed the “the great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money” for nothing.
The millions were originally due to be transferred to Novo Banco, but when BdP reneged on this detail over the festive season, the gloves came off – with both sides facing up for what could be another cataclysmic disaster for the Portuguese economy.
If British courts eventually do agree that Goldman Sachs et al have been shortchanged, Novo Banco will end up even worse off than it is now (last reports point to it needing a billion euro recapitalisation, and that’s after it morphed from the old BES with the help of €3.9 billion ‘loaned’ by Portuguese banks).
In other words, all the assurances that “the taxpayer would not be damaged” look very likely to have been expedient hot air. And that is before one even considers the course of the legal fight ongoing among ‘small investors’, claiming Novo Banco owes them another €720 million.
A demonstration of these investors is expected on Monday (August 10) while yesterday their association of the indignant delivered an open letter to potential buyers Fosun, Anbang and Apollo saying: “If they tell you that the commercial paper holders do not have the right to be reimbursed by Novo Banco, or whoever buys it, do not believe them!”
As we write, the clock ticks towards the witching hour of 5pm, when Chinese corporations Fosun and Anbang and US investment fund Apollo are all due to submit their final offers for the purchase of Novo Banco.