Bank of Portugal Stops Novo Banco Sale After Rejecting Bids

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The Bank of Portugal said it “interrupted” the sale of Novo Banco SA because bids for the company that emerged from the breakup of Banco Espirito Santo SA weren’t high enough.

“None of the three binding proposals presented the adequate conditions in terms of price and risk,” the central bank said in a statement on its website, without identifying the bidders. The sale will resume when it’s possible to get offers that are more in line with the goals set by the Bank of Portugal, according to the statement.

Anbang Insurance Group Co., Apollo Global Management LLC and China’s Fosun Group had submitted binding offers for Novo Banco, a person with knowledge of the sale said this month.

With the sale, the central bank was seeking to recoup part of the 4.9 billion euros ($5.5 billion) used to rescue Banco Espirito Santo SA in August last year. The Resolution Fund got a 3.9 billion-euro loan from the government to finance its investment in Novo Banco.

The sale was carried out in “extremely adverse circumstances,” with the deepening of the Greek debt crisis and the “recent disturbance” in Asian financial markets, the Bank of Portugal said.

Stress Tests

The attempted sale was affected by the possible need to improve Novo Banco’s capital ratios following stress tests and the results of the European Central Bank’s Supervisory Review and Evaluation Process, which will be known at the end of 2015, according to the Bank of Portugal. The central bank said it wants to resume the sale after these “factors of uncertainty” are removed.

The Bank of Portugal will ask Novo Banco to present a plan that includes measures to optimize its capital, according to the statement.

With the sale halted, Novo Banco’s management can now decide if it wants to sell certain assets, said a person with knowledge of the process. The central bank expects the sale of Novo Banco can still be carried out by August 2016 and solutions other than the sale of 100 percent of the lender may now be considered, the person said.

Portuguese Prime Minister Pedro Passos Coelho reaffirmed today that if Novo Banco is sold for less than the value of its rescue, the country’s banks would have to bear that loss.

Once Portugal’s biggest bank by market value, Banco Espirito Santo was bailed out after regulators ordered it to raise more capital following the disclosure of potential losses on loans 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.

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