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Report: Asset managers move to block Novo Banco's sale


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Report: Asset managers move to block Novo Banco's sale

BlackRock Inc. and other international fund managers will seek an injunction to block the recently announced sale of a controlling stake in Portuguese lender Novo Banco SA to U.S. private equity firm Lone Star Funds for a €1 billion capital injection.

The firms claimed April 3 that the rules governing the sale process are "discriminatory and breach Portuguese and EU law," the Financial Times reported the same day.

BlackRock, Elliott Management Corp. and Pacific Investment Management Co. LLC were among 14 asset managers that filed a lawsuit against the Portuguese central bank in April 2016 in a bid to recover investments in Novo Banco that were written down at the end of 2015.

In their statement, the asset managers reportedly said the transfer of bonds to the bad bank had resulted in losses of approximately €1.5 billion for ordinary retail investors and pensioners, and argued that the closure of the lender's sale would impair their clients' claim against Novo Banco and their clients' ability to recoup losses.

The transaction, which will require approval from the European Central Bank and the European Commission, would conclude more than two years of efforts to sell Novo Banco, the good bank carved out of Banco Espírito Santo SA in 2014.

It will also require senior bondholders to approve the conversion of €500 million worth of senior bonds into new, higher-risk bonds as a way to boost the lender's capital, the FT noted.