State to receive further 5% share in Novobanco

 In Banks, News, Resolution Fund

The Resolution Fund, which was set up in 2014 to ensure several banks, including Novobanco were sufficiently capitalised, has paved the way for the State to increase its capital share in Novobanco by 5%.

The fund has decided not to buy the tax credit conversion rights given in 2016 and 2017 because of losses, for which it will have to pay almost €250 million.
“The RF (FdR) has decided not to exercise the right to acquire conversion rights attributed to the State regarding the financial years of 2016 and 2017”, states the fund led by Luís Máximo dos Santos according to online news source ECO.
The reason being “the future exercise of the right would imply (…) the payment of a price out of line with reasonable valuation references of the capital of Novobanco”.
Given this scenario, Novobanco will increase its capital to issue new shares that will result from the conversion of the said tax credits in an operation that will probably take place this year.
Finally, the State, through the General Directorate of the Treasury and Finances (DGTF) will see its direct position in Novobanco increase by 1.56% — achieved after a similar decision by the FdR last year — to 5.69%.
This means that the shareholding structure in the bank will take the following form: US fund Lone Star (75%), Resolution Fund (19.31%) and State (5.69%). However, because of tax credits that have already been given to the bank to 2020, the State will end effectively end up with a 15.96% in Novobanco.