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US equity firm makes strongest bid to buy Portuguese bank

Posted January 5

— Portugal's central bank says an offer from U.S. private equity firm Lone Star is the most promising bid to buy Novo Banco, the so-called good bank salvaged by the Portuguese government from the collapse of major lender Banco Espirito Santo.

The Bank of Portugal said late Wednesday it has invited the fund, based in Dallas, Texas, to "deepen negotiations" over the possible purchase, though it said rival bidders have expressed a willingness to improve their offers and would not be excluded.

The statement gave neither price tag nor date for a final decision. It did not name the other bidders.

Novo Banco received 3.9 billion euros (currently $4 billion) from the Portuguese Treasury after Banco Espirito Santo went bankrupt in 2014. The government, which is striving to ease Portugal's huge debt load, wants taxpayers to get that money back.

The sale of Novo Banco has been fraught with difficulties, including litigation risks stemming from the controversial collapse of BES. Authorities initially hoped to sell Novo Banco by September 2015. After more than a year of further negotiations, the central bank issued its statement close to midnight.

The central bank said its main concerns in the sale were ensuring stability in the Portuguese financial system and market confidence in Novo Banco. "At this stage in negotiations, the proposal from potential investor Lone Star is the one which most assures those goals but there are provisos, namely the potential impact on public accounts, which we will seek to minimize or remove during the deepening of negotiations which will now commence," the statement said.

It did not elaborate, but analysts said the comments indicated authorities believe the price offered by Lone Star is too low.

When it was created, Novo Banco was Portugal's third-largest bank by total assets and the leading bank for corporate clients. It had about 8,000 employees and operations in 22 countries.

The Bank of Portugal is leading the negotiations and is to deliver a recommendation for the Finance Ministry to make a final decision.

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