Banco de Portugal considers that the debt restructuring of Luís Filipe Vieira at Novo Banco it is “unrealistic” and has “little adherence to reality”.
The debt restructuring of the group of Luís Filipe Vieira at Novo Banco raised many doubts to Banco de Portugal in 2018.
Even so, the operation proceeded without the opposition of the Resolution Fund because, when the President of Benfica was called to speak, the process was already underway and the bank had made commitments to Promovalor, so there were reputational risks.
However, to clarify the issues raised by the services of Banco de Portugal, an independent audit of the agreement was requested in order to assess its merits and what are the prospects for recovering the debts of the president of Benfica. This work is now about to be completed by BDO.
In a service note consulted by ECO, technicians from Banco de Portugal concluded that the business plan of the special alternative investment fund (FIAE) that stayed with the credits and assets of the Vieira real estate group is “Ambitious and unrealistic” and with “little adherence to reality”.
The business plan foresees that the fund will generate sufficient revenues for the full payment of all financing granted by the bank to Promovalor (more than 200 million), including the 160 million euros of the so-called VMOC (Mandatory Convertible Securities).
However, for Banco de Portugal, it is “unwise” assume that the VMOCs will be repaid taking into account the obstacles that the business plan will face.
Even Novo Banco has the value of the VMOC provisioned at 100% in its accounts, which is an indication of “Lack of belief” in the FIAE business plan, argued the supervisor.
Among other detected flaws, the doubts do not remain here.
One of the fund’s main assumptions is the development of real estate projects, which will imply more bank financing. But, “it is not considered probable”, according to Banco de Portugal, that another bank wants to finance these initiatives taking into account that the assets are mortgaged to Novo Banco.
In this way, Novo Banco will have to finance these projects, otherwise it will be lost “The margin for real estate promotion” incorporated into the business plan.
As part of this restructuring, loans of around 134 million euros were transferred from Novo Banco to FIAE, with existing financing of 85.8 million euros still being restructured by the bank.
On the other hand, more than two dozen real estate assets located in Portugal, Spain, Brazil and Mozambique have been integrated into the fund, businesses that Vieira believes will pay all debts with Novo Banco, including the VMOC of 160 million. However, ECO recalls, many of these projects are still to be developed.
Also the choice of C2 Capital Partners was the target of harsh criticism by the supervisor: there was no “competitive and transparent process” in the selection process of the FIAE management company.
Another remedy left by Banco de Portugal was the fact that the fixed commissions that will be paid to the management company of Nuno Gaioso Ribeiro amount to EUR 15 million over the 25 years of the fund’s life.
Despite all doubts about this agreement between the bank and Promovalor, Banco de Portugal recognizes that the alternative to restructuring would produce, “with a high probability”, a “Worst result” for Novo Banco, according to the supervisor’s technicians.