A former partner of reviled international finance house Goldman Sachs says he has access to a €15 billion fund to buy up bad debts from Portugal’s weakened banking sector.
António Esteves worked at several international banks, lastly at Goldman Sachs, and claims he has the support of a big bank, of Deloitte and lawyers Vieira de Almeida, to buy up the debt.
The Government and the Bank of Portugal received an outline proposal from Esteves two months ago and have been pondering its potential impact ever since.
Esteves must be fed up waiting as he now is discussing the outline proposal in the public domain, putting pressure on the Bank of Portugal’s governor, Carlos Costa, to stir from his slumber and make a statement, better still: a decision..
Without disclosing details, Esteves said his proposal meets two fundamental conditions for success: it buys the bad debt from the banks at the book valuea, and it requires a public guarantee on securities to be issued in the market.
"We have delivered a full proposal, with no burden on the sector," Esteves told Público today, while not explaining exactly what is on the table.
Esteves refers to the existence of publicly guaranteed securities, a "private and highly flexible" solution, which also provides for "contributions to recapitalisation funds for small and medium-sized companies, or the transformation of debt into capital.”
Of the €15 billion in unsecured loans, €4.25 billion is at Novo Banco, €4 billion is at Caixa Geral, €3.25 is at BCP and €2 billion is at Montepio, according to Público, which reckons the the market value of this debt may be only half the book value i.e €7.5 billion.
It is not yet clear how a proposal that relieves banks of their unsecured lendings will pass through European competition rules that limit State aid.
Esteves says he can resolve the problems that are holding back Portugal’s banks, by buying up all the bad debt at book value, the banks will be free to start lending again and could have a significant impact on the economy.
This financier isn’t in this deal for his health and will look to sell on his new loan book at a significant profit.
If a deal looks to good to be true, is invariably is but without knowing the details and without any comment from the Bank of Portugal, intelligent interpretations at this stage are thin on the ground. Esteves, after all, is well grounded in the dark arts practiced by the Great Vampire squid aka Goldman Sachs.
If this is a way for Goldman Sachs to recover its BES/Novo Banco losses, over €700 million, then it is likely the bank is working behind the scenes and involved in arranging the €15 billion facility.
