On Wednesday 11 October, the European Commission approved the aid granted by the Portuguese state for the sale of the bank Novo Banco to Lone Star, as compliant with EU State aid rules.
The bank Banco Espirito Santo (BES) was placed under a resolution procedure in August 2014 by the Portuguese state, which transferred certain assets of the bank to a bridge bank, Novo Banco, through BES. The Commission approved the sale of these assets, together with guarantees, on 4 August 2014, as the subordinate shareholders and bond-holders of BES made a significant contribution to the costs of resolving BES, which made it possible to limit the level of public support. The Portuguese authorities also undertook to sell the bridge bank, Novo Blanco, to limit competition distortions.
The European Commission authorised the sale of Novo Banco to Lone Star on 10 July of this year (see EUROPE 11826) and therefore had to return its decision on the basis of the rules on state aid.
Firstly, the institution noted that Portugal had made proper use of the competitive sales procedure to sell Novo Banco to Lone Star. It then examined the aid measures of the Portuguese authorities associated with this sale. Lone Star undertook to inject €1 billion of capital, carry out an in-depth restructuring of the bank and to raise €400 million on the market by issuing category two capital instruments. For its part, the Portuguese state undertook to provide public guarantees up to €3.89 billion if the capital ratio fell below a given threshold and to subscribe category two capital instruments if required. It will also provide capital if necessary, in the event that Lone Star or other private investors are unable to do so in a particularly difficult context.
In light of these measures, the Commission considered that the operation was compatible with EU State aid rules. It also concluded that the planned restructuring would allow Novo Banco to return to viability, and therefore decided to approve the transaction. (Original version in French by Lucas Tripoteau)