Wednesday, January 11, 2017

Lone Star admits commitment in ensuring the public – Observer

u.s. fund Lone Star, which was chosen by the Bank of Portugal, as the best offer by the New Bank, is available to reach a compromise on the decisive question of the assurance to the public about the value of the assets of the bank — the "red line", by Mário Centeno. The press has spoken of a guarantee of 2,500 million euros to safeguard the possible negative surprises in asset value (in total, valued at around nine billion euros) but the u.s. fund admits, established the Observer, which is able to reach creative solutions that, in practice, represent a compromise between the parties.

the availability of The Lone Star to find alternative ways to try to close the deal comes at a time when, as reported in the Public on Wednesday, the Government took over the reins of this negotiation, after the Bank of Portugal have led the work so far. The issue is that both the Lone Star as the other fund north american competitor, the Apollo/Centerbridge, they want a public guarantee to limit the risk of assets poorly evaluated that may make the deal less advantageous for the buyer, but also put at risk the capital ratios of the institution by regulators.

But, according to found the Observer next to the source close to the negotiation, there is opening for that, by introducing some complexity in the definition of any public guarantees, it may be possible to arrive at good port in this negotiation.

When the Bank of Portugal chose Lone Star as the favorite candidate, had already indicated that the next stage of negotiation if you try to "remove" the "constraints associated with potential impact on the public accounts" — but already at that time the Bank of Portugal admitted, also, "minimize" this impact, that is, not excluding that it may be difficult to eliminate these "constraints" in full. What makes this matter, at this stage, is more political than financial.

"We will continue to work tirelessly with the Bank of Portugal, the Resolution Fund and the Portuguese government to ensure a final agreement to support the restructuring of the New Bank, to a benefit of long-term customers, employees, creditors, and of the Portuguese economy in general," said the fund on January 5, after having been chosen by the Bank of Portugal.

Despite being several months ago to analyze the balance sheet of the New Bank, the u.s. fund wants to have this assurance to the public about the value of the assets as happened, for example, with two German banks that bought (the AHBR/CorealCredit, in 2005, and the IKB, in 2008). Despite not being present in the Portuguese financial system (as is already the Apollo, this time, with the insurer Tranquility), the Lone Star has sought to convey the message that it is not a stranger to the banking industry. In the first, because its founders came from the banking and, later, in the european context, has been made in these two important business in Germany.

The bank bought in 2005 has already been sold, eight years later, a German bank (Aareal Bank) after a clean balance sheet and operational restructuring — but there was not what could be considered a decommissioning of the operations. Already the IKB, which was bought by the German state, got into difficulties by having an exhibition of the unbounded to a bubble of subprime north american. The bank was rescued and sold to Lone Star, that still retains the property of the institution.

Described by some as a fund vulture, the Lone Star has sought in recent weeks to undo that image and show that their intentions with the New Bank is not conducting a business fast, eventually with a dismantling of the institution, as some have claimed. With the examples of German banks are also very much connected with the credit to small and medium-sized enterprises, the Lone Star has sought to show that, in the case of banks, their management can be marked by a preservation of the existing structures, and by a stimulation of the activities in which the bank is already involved.


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