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Novo Banco: One More Twist In The Saga

08 September 2015 by lberuti

The auction of BESPL (Novo Banco, SA) is meant to be the final chapter of the restructuring of Banco Espirito Santo, in the wake of the unsustainable losses the bank incurred on loans made to other companies of the Espirito Santo family business empire which required a €5bln bailout from Portugal a year ago. The Portuguese authorities broke up the bank and transferred the healthy assets to BESPL, with a view to sell it and recover as much of the bailout cost as possible by the end of August. But on September 1st talks with the highest bidder (rumoured to be the Anbang Insurance Group, a Chinese company) faltered and the Bank of Portugal had to invite second-ranked bidder Fosun, another Chinese insurance and asset management company, at the negotiation table. It was recently announced that the outcome of this second attempt at selling BESPL should be known by September 14th, and in any case the Portuguese government would like the sale to be closed before the country’s parliamentary elections on Oct 4th. The uncertainty created by the whole process did not go down well with investors who had made BESPL one of their favourite financial long risk positions. The 5 year risk premium stabilised today, but it is back to the widest level of the last 3 years, more than double what it was a week ago.