Portugal

Novo Banco is seeking to buy back up to 500m of senior debt, some of which is held by retail investors, at a discount to par as it looks to bolster its balance sheet, Reuters reported. The Portuguese bank has launched a discounted cash tender offer on eight euro and US dollar bonds, which have a face value of 2.39bn-equivalent, through an unmodified Dutch auction. Banks bought billions of subordinated debt at discounted prices during the financial crisis as a way of bolstering their balance sheets but senior purchases below par are much more unusual.

The European Commission has put off a contentious decision on imposing financial sanctions on Spain and Portugal for failing to bring their budget deficits within European Union rules, saying it would revisit the issue in July, after Spain had held a general election, The Wall Street Journal reported. The commission, the EU’s executive arm, said Wednesday the two Iberian countries should take more measures to reduce their budget deficits in 2016 and 2017, and gave them an extra year to get their deficits within 3% of gross domestic product, the bloc’s ceiling.

Portugal faces potential liabilities of more than €1.5bn after losing a British court battle over derivatives that Lisbon has challenged as “toxic”, the Financial Times reported. State-owned transport companies have for more than two years withheld payments due to Santander on interest-rate swaps described by Portugal as “highly speculative”. But in a case brought by the Spanish bank, the High Court has ruled that English, not Portuguese law should apply to the nine contracts, effectively overturning Portugal’s bid to invalidate them.

Investors facing huge losses on Novo Banco SA bonds suffered another defeat, Bloomberg News reported. The group that oversees the credit-default swaps market declined to amend any contracts insuring the Portuguese bank’s debt, probably killing off swapholders’ last chance of getting a payout following the transfer of about 2 billion euros ($2.2 billion) of bonds to a bad bank. All committee members voted against changes, the International Swaps & Derivatives Association said in a release on Wednesday.

The European Commission approved Portugal’s 2016 draft budget yesterday after the new Socialist government promised to hike indirect taxes to meet EU budget rules while also easing austerity to keep its leftist allies happy, the Irish Times reported. The decision by the commission will come as a relief to Portugal’s government, which was able to maintain most of its initial budget promises, such as hiking civil servants’ wages and raising the minimum wage, but had to lower its economic growth outlook.

Portugal’s new Socialist government faces an embarrassing rejection of its first “anti-austerity” budget by the European Commission on Friday as eleventh-hour talks failed to break a stalemate over additional cuts needed to bring Lisbon in line with EU deficit rules, the Financial Times reported. Portuguese officials expressed confidence they would overcome objections from the commission, which last week warned Lisbon it risked “serious non-compliance” with the bloc’s fiscal rules.

The European Commission on Wednesday raised questions about Portugal’s budget plan for this year, a move that could put pressure on the government to soften its antiausterity agenda, The Wall Street Journal reported. In a letter dated Jan. 26 and addressed to Portuguese Finance Minister Mario Centeno, the European Union’s executive arm said the budget plan sent to Brussels last week envisioned a structural deficit of 1.1% of gross domestic product this year, which is more than recommended by the commission.

Portugal’s newly appointed Socialist government said Friday that it will reverse public wage cuts and lower some taxes this year, but it will still manage to cut the country’s budget deficit by increasing other taxes and projecting higher economic growth, The Wall Street Journal reported. Finance Minister Mario Centeno said in a press conference that he sees the economy growing 2.1% this year, above the 1.7% projected by the European Commission in November of last year.

Portugal’s central bank has offered to partly compensate Novo Banco bondholders who lost money when their securities were transferred to a “bad bank” last month in a bid to ease tensions with the government and furious international investors, the Financial Times reported. The move is seen as an attempt to repair reputational damage caused by losses suffered on almost €2bn of bonds which provoked threats of lawsuits.

Portugal faces fresh concerns relating to one of its smaller banks after shares in Banif tumbled Monday amid concerns about its ability to pay back loans it received in a bailout of the country’s banking sector, the International New York Times reported. Banif was one of the smaller banks to receive emergency lending as part of the international bailout of 78 billion euros, or $85.7 billion, that Portugal negotiated in 2011.