Lone Star emerges as exclusive bidder for Novo Banco

The Portuguese bank was bailed out in 2014 with €4.9bn from the central bank of Portugal.

Dallas-based distressed debt and equity firm Lone Star Funds is the exclusive bidder for Portuguese bank Novo Banco, according to a statement from the US private investment firm issued on Monday.

Lone Star was previously named the preferred bidder for the distressed bank on 5 January by Banco de Portugal, the Iberian nation’s central bank, which had also received offers from other institutions, the statement said.

According to a Monday article from Financial Times, the other bidders included China Minsheng Financial, Apollo Global Management and Centerbridge.

Also on Monday, Banco de Portugal issued a statement noting that Lone Star is in “a concluding round of exclusive negotiations” with the possibility of finalising terms for the sale of Novo Banco.

A source familiar with the matter told Private Equity International that while they could not confirm an official timeline for the deal to close, the Portuguese government has been engaged in this matter for a long time and all parties would like to have a decision made to close the transaction sooner than later.

Indeed, the central bank has been trying to sell Novo Banco for two years, after it survived as the good part of Banco Espírito Santo that collapsed in August 2014. The rescue of Novo Banco as a separate entity required a €4.9 billion bailout through a resolution fund from Banco de Portugal.

“We are deeply optimistic about Portugal and the future of the country’s economy, and this is why we seek to provide the capital, resources, and expertise necessary to ensure that Novo Banco remains a strong, domestically focused pillar of the Portuguese banking system,” Lone Star Europe president Olivier Brahin said in Monday’s statement.

This is not the first time Lone Star would be managing a bank or investing in Iberia. According to the statement issued on Monday, Lone Star has acquired six financial institutions globally, including German bank Corealcredit Bank AG, which it acquired for restructuring in December 2005.

Lone Star has a strategic plan for Novo Banco that includes keeping the bank’s core business focused on serving its Portuguese clientele and on corporate franchises, and maintaining Novo Banco’s existing management team. The investor will rely on the leadership of the bank’s chief executive officer António Ramalho, whose knowledge of the bank is “key to its revitalisation”, according to the Lone Star announcement.

The media report cited above says Lone Star allegedly offered €1 billion for Novo Banco, sweetening the deal from its previous offer of €750 million. But the fund manager proposed to purchase about 65 percent of Novo Banco, in misalignment with the European Union’s resolution that the Portuguese bank would have to sell 100 percent of it.

In November, Lone Star closed its 10th flagship fund, Lone Star Fund X, on $5.6 billion, as reported by PEI. It was unclear if Lone Star was investing in this deal out of Fund X.

Lone Star declined to comment. Banco de Portugal and Novo Banco did not respond to requests for comment.