* Aethel Partners wants to block sale to Lone Star
* London-based firm complained to central bank about process
* Aethel said sale should be relaunched
* Aethel move further complicates sale that is already in
* EU says sale must be completed by August
By Sergio Goncalves
LISBON, April 20 A failed bidder for Portugal's
third-largest lender Novo Banco has asked its lawyers to block
the 1 billion euro ($1.08 billion) sale to U.S. fund Lone Star
and told the central bank it should relaunch the bidding.
London-based financial firm Aethel Partners complained to
the Bank of Portugal this week in a document viewed by Reuters.
It said the central bank had not properly considered its 3.8
billion euro bid when it awarded Novo Banco to Lone Star last
European Union rules require Portugal to sell the bank by
August or it may have to be liquidated. The move by Aethel
threatens to further complicate a transaction that is already
snagged on a separate legal dispute involving some of Novo
The sale is one of the Socialist government's biggest
headaches and could impose costs on a country that made huge
efforts to cut its budget deficit since the eurozone debt crisis
when it had to be bailed out.
"Aethel has already instructed its lawyers in Portugal to
rapidly find a way to suspend the (sales) process and block the
decision to sell Novo Banco to Lone Star," a spokeswoman for
Aethel told Reuters.
"The execution of these judicial proceedings (seeking
information and documents) may lead to an injunction and then to
an action to challenge the decision."
The bondholders' legal challenge also says the tender
process did not follow correct procedures by banning them from
taking part in the sale because they were in a legal battle with
The Aethel spokeswoman said it would request information and
documents from the central bank on the sales process.
A Bank of Portugal spokesman declined to comment on
potential legal action by Aethel. A spokeswoman for Lone Star
declined to comment on the challenge to the deal.
Novo Banco was carved out of Banco Espirito Santo, which
collapsed under a pile of debt in 2014 and had to be rescued in
a 4.9-billion-euro operation by the previous government. Novo
Banco was left with the healthy operations of BES.
The current government has said it will not spend any
taxpayers money on Novo Banco.
The European Union deadline was set under new rules designed
to ensure governments did not end up owning rescued banks. The
rules say that if the bank is not sold, it must be liquidated. A
first attempt to sell it in 2015 failed as bids were too low.
The sale of Novo Banco already faces an injunction in a case
filed by bondholders led by U.S. fund BlackRock that want to
recover 1.5 billion euros of losses on Novo Banco bonds.
The bondholders asked a Lisbon court this month to stop the
sale to put pressure on Portugal to pay them their losses. The
court has yet to rule on the injunction request and has not
publicly stated when it will hand down a decision.
If the sales process were to be relaunched, other firms
could potentially enter the bidding, including Aethel.
Aethel had offered to pay 2.8 billion euros into the
country's bank resolution fund, the entity which formally owns
Novo Banco, and make a 1 billion euro capital injection into the
bank itself. In return, it wanted 91 percent of Novo Banco.
Instead, the central bank agreed to sell 75 percent of Novo
Banco to Lone Star in return for a 1 billion euro capital
injection into the bank.
Aethel Partners was established in 2014. It was founded by
Ricardo Santos Silva, former deputy president of hedge fund
Lyxor Asset Management, and Aba Rosa Schubert, who was
previously a partner at Eton Park Capital Management, a hedge
Since the rescue in 2014, Novo Banco has posted only one
quarterly profit and remains lumbered by bad loans, debt and
($1 = 0.9289 euros)
(Reporting By Sergio Goncalves, writing by Axel Bugge, editing
by Mark Bendeich and Anna Willard)