Jan 5, 2017

Lone Star Is Picked for Talks to Buy Portugal's Novo Banco

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

The new phase of talks with Lone Star doesn't exclude the possibility of other potential bidders improving their proposals, the Lisbon-based Bank of Portugal said in a statement on its website late on Wednesday. During the talks, an attempt will be made to minimize 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 in London. "How that is managed vis-a-vis state-aid rules will be interesting."

Lone Star is proposing 750 million euros ($787 million) to buy all of Novo Banco and pledging to inject another 750 million euros in the bank, Portuguese newspaper Jornal de Negocios reported on Thursday. 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.

Bloomberg Markets
Anabela Reis

Photo: Thomas Meyer/Bloomberg