HE new bank and the Resolution Fund reached an agreement in principle to put an early end to the mechanism through which the public body, which operates under the Bank of Portugal, injected around three billion euros into Novo Banco in recent years. The news was reported by the newspaper Eco and confirmed by Observador through a source close to the process.
The information collected indicates that A document has already been delivered to the Ministry of Finance draft of the contract which, although still subject to possible changes, may be signed between both parties. If the agreement is signed, the Lone Star fund, which in 2017 paid one billion euros for 75% of Novo Banco, is closer to being able to move forward with the sale of part of the capital on the stock market, a sale that should value the bank between four and five billion.
The operation could advance in early 2025, but only if the agreement with the Resolution Fund is confirmed.
The official Novo Banco source contacted did not comment. An official source from the Bank of Portugal and the Ministry of Finance, also contacted, has not yet provided clarifications.
The expected date for the end of the “contingent capital mechanism”, known by the acronym CCA, is the end of next year (2025). But an early closure has been negotiated for almost two years. Because? Because, while the CCA is active, shareholders cannot withdraw capital from the institution, specifically through the distribution of dividends.
Given the intention to sell part of the capital on the stock market – between 25% and 30%, predictably – this dividend ban undermines Novo Banco’s mission of attracting investors to buy shares, since whoever buys the securities would have to wait before of power to withdraw any income. CEO Mark Bourke himself has already acknowledged that the CCA is a “blockade” for stock market sales, which is the “core scenario” toward which management is working.
But there is another issue – as or more pressing than the sale on the stock market – that is related to the prohibition of dividends and that interests not only Lone Star but also the State and the Resolution Fund (which together have the remaining 25% of New Bank). As long as the prohibition exists, neither the North American fund nor public organizations will be able to extract capital from the institution. And Novo Banco has capital ratios of around 20%, almost double what European banking standards require, leaving room to make investments or, alternatively, pay a large windfall dividend.
Fund that bought Novo Banco prepares sale (on the stock market) for four times the price. Before, the State could receive dividends of hundreds of millions
Source: Observadora
