However, this was not the first time Novo had asked Banco to help with the resolution fund. If the new application is accepted, Novo`s total capital injection from the FdR would increase to 2.978 billion euros since 2017. The Bank of Portugal stated that a conditional capital mechanism would be put in place to cover the bank`s potential capital needs, for a maximum amount of 3.89 billion euros, and stated that the mechanism was not a guarantee of loss hedging. In early March, Novo Banco requested a capital injection of 1.037 billion euros, much of it from the Portuguese state. It was not until the first half of 2020 that Novo Banco estimated the capital contribution at 176 million euros. Asked if the bank would re-release the sale of real estate, Ramalho said it did, but he had no forecast of when more sales would be made in a real estate package. However, it wants to comply with the agreement that Novo Banco will make a profit in 2021. This amount was the result of “another agreement between the bank and the resolution fund,” which set the CCA`s amount at 3.89 billion euros. In an interview with Jornal de Negécios and Antena 1, Novo Banco CEO Antonio Ramalho said that, given the impact of Covid-19, the institution will need more capital than planned for this year, which changes the estimate it had already sent to the resolution fund. The agreement defined that “the series of problematic assets, with a gross amount of 12.7 billion euros and a net amount of 7.926 million euros in June 2016, had been fixed, which would result in a reduction in management by the possibility of these assets,” he said. In addition, Novo Banco will exchange 500 million euros of priority bonds for new bonds in order to strengthen the core capital ratio before Lone Star takes over the bank. “Nata III is a transaction that represents a significant percentage of the assets protected by the conditional capital mechanism, which is why this issue will of course be discussed with the resolution fund. The explicit request [to suspend the sale of assets] was until the delivery of the review, that request expired,” said Antonio Ramalho.
LISBON (Reuters) – Portugal has agreed to sell a 75 percent stake in the state-backed lender, Novo Banco, to U.S. private equity firm Lone Star in exchange for a 1 billion euro capital injection into the facility, the government said on Friday. As a result of the decision, the Bank should, in the extreme case where contractual mechanisms are not sufficient to ensure compliance with Novo Banco`s capital ratios, endeavour to implement measures to restore capital ratios with its resources. The supervisory authority explained the need to distinguish the operation of the conditional capitalisation mechanism from the safeguard measure called “Capital Backstop” provided for in the European Commission`s October 2017 decision, which approved the restructuring plan of Novo Banco and authorized the sale to Lone Star, thus closing the liquidation procedure of Banco Espérito Santo. At the time of the sale, a conditional capital mechanism was agreed that the Novo Banco resolution fund would compensate by 2026 for capital losses on a number of assets it “inherited” from BES up to a maximum of 3.89 billion euros.