January 4, 2017 / 11:56 AM / 7 months ago

Sale of Portugal's Novo Banco not ready for completion -report

People use ATM machines outside a branch of Novo Banco in Lisbon, Portugal, September 26, 2016.Phil Noble

LISBON (Reuters) - Portugal is not ready now to complete the sale of Novo Banco, the bank carved out of Banco Espirito Santo (BES), and the state will provide no guarantees for the buyer, Finance Minister Mario Centeno was quoted as saying on Wednesday.

Portugal had hoped to decide on the sale of Novo Banco by the end of last year and the central bank, which is running the sales process, is expected to make a recommendation to the government soon based on the bids it has received.

There is a final August 2017 deadline for the sale.

China's Minsheng Financial Holding, U.S. funds Apollo and Centerbridge and private equity firm Lone Star are leading attempts to buy Novo Banco, four sources told Reuters last month.

"The negotiating process (for the sale) is now reaching an important moment, but this is not the end," Centeno told daily Diario de Noticias in an interview published on Wednesday.

He said the central bank would update the government on the state of negotiations with the bidders, adding: "This is not necessarily the end of this process, in the sense that there may have to be adjustments due to the proposals that appeared."

Portugal salvaged Novo Banco, or the "good bank" in a 4.9-billion-euro (4.2 billion pounds) rescue of BES, which collapsed under the weight of debts of its founding family. An attempt to sell Novo Banco in 2015 failed because the bids were considered too low.

The rescue has led to a series of court cases by shareholders and other stakeholders hit by the process, prompting some bidders to request state guarantees to face potential future legal liabilities.

But Centeno ruled out state guarantees for any buyer, saying: "A state guarantee to support a private deal that puts at risk taxpayers' money is obviously something we do not envisage in this deal."

He said the sale process would not end now. "We are definitely closer to the end because an important phase is reaching its conclusion, but I won't say anything is over until I have access to all the information."

Reporting by Axel Bugge; Editing by Catherine Evans

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