BES ‘aftershocks’ continue this week, with new signs that Portugal’s plan to swim out of trouble could be hitting major-league icebergs.
The sale of BES’ “good bank” Novo Banco to US ‘vulture fund’ Lone Star has been fraught with ifs and buts from the start (click here).
There are a number of court challenges still in place (click here), but the Bank of Portugal’s insistence that everything should go ahead as planned has, up till now, won through.
Today, however, the news is bleak.
Depending on which papers one reads, the line is either that “large foreign investment funds are threatening not to invest any more in Portugal” or that the Bank of Portugal’s role in this multi-billion euro disaster has been “wrong and amateur” from the start.
Whatever the truth, all it will take for the Lone Star deal to collapse is the failure to complete on a €500 million bond ‘buyback’ scheme which still has to be accepted by shareholders – due to have their general assembly in four days’ time.
The plan involves bondholders taking major hits on their investments.
As the Financial Times explained earlier this summer: “Novo Banco is offering to repurchase a series of bonds below face value, with purchase prices ranging from 82 cents on the euro to as low as 9.75 cents”.
It has never been a popular option, but it has always been presented as the only option.
Now, as the buyback approaches (it has to be accepted and acted upon by October 2) leader writers are suggesting the collapse of the sale might well be a disaster and political catastrophe, but it could also be a “lesson in democracy, and the State of Law”.
It could for instance show that “better alternatives exist than the solution adopted by the government”, suggests Ricardo Cabral, writing in Público’s Tudo Menos Economia.
But, until the October deadline runs out, we remain on ‘tenterhooks’, with speculation running riot.