Friday 16 November 2018

Lone Star snaps up 75pc of Novo Banco

Lone Star will pump €1bn into Novo Banco. Photo: Victor Machado
Lone Star will pump €1bn into Novo Banco. Photo: Victor Machado

Gretchen Friemann

US private-equity fund Lone Star has sealed a long-running deal to acquire 75pc of Portugal's Novo Banco, ending a three-year battle to sell the lender.

The deal is likely to provoke comparisons to the firm's strategy in Ireland in the wake of the economic crash when the Dallas-based fund ranked as the largest holder of distressed debt in the State.

At one stage Lone Star contemplated taking over Nama and reportedly button-holed the then Minister for Finance Michael Noonan about the radical plan at the 2012 World Economic Forum in Davos,

Lone Star still holds a banking licence here, acquired when it purchased sub-prime lender Start Mortgages.

Earlier this year the firm bundled some of these loans into a company called European Residential Loan Securitisation 2017-PL1 DAC in a €500m asset-backed bond issuance.

While the firm swooped on over €7bn of debt at the time of the crash, it has exited the bulk of these exposures. According to sources, it remains less interested in current loan sales, including AIB's looming €2bn Redwood portfolio.

Under the terms of the Novo Banco deal, Lone Star will pump €1bn into the state-rescued lender in exchange for a three- quarter ownership slice, the remaining 25pc will be retained by Portugal's bank resolution fund. Lone Star is also expected to raise €400m of Tier 2 capital in the market.

The firm emerged victorious after an initial attempt to sell the lender failed in 2015.

Back then Apollo Global Management - as well as the Chinese private-equity firm, Fosun and insurer, Anbang - were in contention but their bids were rebuffed as too low by the Portuguese authorities.

At a signing ceremony to mark the conclusion of the deal, Bank of Portugal governor Carlos Costa said the deal "allows a very significant strengthening of Novo Banco's capital and the bank now has the means to proceed with a business plan that allows it to continue its relevant position in financing the economy".

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