Lone Star tipped to buy Lisbon lender

Lone Star Funds has been selected by Portugal’s central bank as the best-placed bidder to conclude talks on the purchase of Novo Banco, the lender that emerged from the breakup of Banco Espirito Santo.

The new phase of talks with Lone Star does not exclude the possibility of other potential bidders improving their proposals, the Lisbon-based Bank of Portugal said yesterday.

During the talks, an attempt will be made to minimise the potential impact on government finances that may result from Lone Star’s current proposal, it said.

“Clearly, given the tight timing, the price remains a sticking point and the thorny question of state guarantees,” said Jonathan Tyce, an analyst at Bloomberg Intelligence.

“How that is managed vis-à-vis state-aid rules will be interesting.”

Lone Star is proposing €750m to buy all of Novo Banco and pledging to inject another €750m in the bank, Portuguese newspaper Jornal de Negocios reported yesterday.

The proposal also involves the creation of a company to manage unprofitable assets, and this would benefit from a state guarantee, according to the newspaper.

The Bank of Portugal has been seeking offers for the remnants of Banco Espirito Santo after saying bids submitted in a previous sale attempt two years ago were too low. In November, the central bank said it had five proposals for Novo Banco.

Portugal wants to recoup some of the €4.9bn used to rescue the lender. The sales process will be watched here, as the Government seeks to sell a stake in AIB.

Banco Espirito Santo, once Portugal’s biggest lender by market value, was bailed out in 2014 after regulators ordered it to raise more capital after the disclosure of potential losses on loans linked to companies in the family-controlled Espirito Santo Group.

The central bank moved the lender’s deposits and most of its assets to Novo Banco.

Bloomberg