The Bank of Portugal announced late on Wednesday night that it has failed to choose a winner of the race to control Novo Banco but has suggested that Lone Star might perhaps be the best placed company to complete the deal but that there are still others who might come up with a better offer.
The Lone Star bid contains elements that, if accepted, would harm the public accounts as the Americans are not stupid and want some guarantees that what they are buying won’t suddenly fold beneath them - Portugal's banking sector is not known for its truthfullness, after all.
The US vulture fund has been invited to keep talking and on Thursday the Ministry of Finance confirmed its hope that "the deepening of the negotiations that is now starting, will progress.”
The government has reiterated that the sale of Novo Banco to the private sector will have "no impact at all on Portugal’s public accounts," nor on the taxpayer, and somehow will serve to “guard the stability of the financial system.”
The Ministry of Finance also said that it is analysing in detail the information sent in by the Bank of Portugal, but said "there are now several proposals for the acquisition of Novo Banco," as there have been for some months now.
Finance Minister, Mario Centeno, trotted out the same old waffle: that he believes that the ongoing negotiations with Lone Star will ensure "the stable and long-term continuity of Novo Banco as a financial institution" and "with a very important role in financing the economy, especially small and medium sized businesses."
"The Government also notes that the Bank of Portugal considers that the proposals involve some conditions, but that the potential investors already have expressed their willingness to deepen negotiations in order to overcome these constraints," added the Finance Ministry, with little of subsance to say.
Novo Banco was created in August 2014 as part of the attempted rescue of Banco Espírito Santo (BES) which reported a surprise €3.6 billion half-year loss and promptly went bust. The Bank of Portugal has until August this year to sell Novo Banco, or wind it up - the preferred option for many creditors.
The hapless Bank of Portugal’s management initially had preferred Minsheng from China to buy Novo Banco.
Minsheng was advised by Haitong in Lisbon, run by an Espírito Santo family member, José Maria Ricciardi who suddenly left Haitong during the bidding process with no explanation. Minsheng could not complete the Novo Banco deal as Haitong would not arrange the interim funds as Minsheng waited for the Chinese government to lift foreign exchange controls.
The current mess is even worse than Lisbon and international observers might have imagined with no clear winner and all bidders still in the frame.
The lack of skill and ability shown by the Bank of Portugal and its highly paid negotiator, a former Secretary of State, Sérgio Monteiro, has presented the Finance Minister with no decision, no recommendation and no firm date by which negotiations will be completed.
With Lone Star’s bid of €750 million for Novo Banco’s shares and €750 million for refinancing at some point in the future, the finance minister continues to try and persuade the public that the €1.5 billion offer for the bank somehow will cover the €4.9 billion pumped into it by the taxpayer and the banking sector’s Resolution Fund.
This lamentable muddle yet again has put the spotlight on the Bank of Portugal’s governor, Carlos Costa, who created this mess by throwing money at the BES 'resolution' - a banking collapse that he had helped create by a lack of effective regulation.
The location of the lost city of Atlantis and ‘how the Bank of Portugal governor still has a job’ remain two of life’s great mysteries.
The Council of Ministers met anyway this morning to discuss the sale process and must despair at the lack of progress. To be told that Lone Star is “best placed” but that there are a few problems in the bid that will affect the public accounts, and that all other bidders are still in the process, hardly represents the sort of result the taxpayer is paying for.
In addition to the Lone Star, the Apollo-Centerbridge proposal also demands taxpayer-funded guarantees which need to be removed to enable the government to stick to its promise that the taxpayer will not be affected by any sale.
When something is decided, perhaps someone in charge will let the public know.
