July 12, 2018 / 9:29 AM / 10 days ago

Popular had 5.5 billion euro takeover offer just before rescue: former chairman

MADRID (Reuters) - Banco Popular received a takeover offer worth 5.5 billion euros ($6.4 billion) just months before being wound down and sold to Banco Santander (SAN.MC) for one euro, a former chairman said on Thursday.

Former chairman of Banco Popular Angel Ron stands at the parliament in Madrid, Spain July 12, 2018. REUTERS/Javier Barbancho

Banco Popular, saddled with big debts, became the first bank to be wound down using new European rules aimed at avoiding taxpayer funded bailouts in June 2017.

On Thursday, former chairman Angel Ron said the bank was solvent before being wound down and blamed the liquidity outflows under his successor Emilio Saracho, a former JPMorgan vice president, for its collapse.

But its sale for a nominal one euro, arranged by the European Union’s Single Resolution Board (SRB), is being contested in courts by bondholders and shareholders who suffered heavy losses.

“It is true that we had received an offer a few months before of 5.5 billion euros,” Ron said. He did not give more details.

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Ron said the bank was solvent before being wound down.

“The bank had never before applied for emergency assistance (with me as chairman). It was on June 5 when it sought an emergency assistance line after the bank suffered deposit outflows of 19 billion euros,” he told a parliamentary hearing.

Ron said the resolution process undertaken by the SRB was inadequate after stating that the bank had passed all possible controls: “Not only was the bank solvent, it also complied with the regulatory minimums,” he said, adding that when he left the bank it had a market value of 3 billion euros.

However, Saracho said in his turn during the parliamentary hearing that the top problems of the bank were both solvency and liquidity and also a lack of credibility. He revealed that Popular finally received 3 billion euros in emergency assistance which was not enough.

“There was a moment when the bank could not even afford to pay the coupon or interest on certain debt instruments,” Saracho said. “There comes a time when you cannot live in denial.”

In the days before the resolution, Banco Popular held informal talks to sell to competitors such as Sabadell (SABE.MC), Bankia (BKIA.MC) and BBVA (BBVA.MC), Saracho said, but these came to nothing.

SRB head Elke König, asked on Wednesday if the one euro price was sufficient, said: “To define a price, it needs a buyer who is able to pay the price and we have always said we take the buyer who offers us the best price.”

Ron was ousted in December 2016 after shareholders rebelled over slow progress in cleaning up the bank’s balance sheet, saddled with 37 billion euros in troubled real estate assets.

During Ron’s 10 years as chairman, Popular shares lost around 95 percent of their value.

“Popular hit a wall at 200 kilometers per hour, multiplying the balance (sheet) by four. In Spain, there was a party and Popular bank did not want to be left out,” Saracho said, referring to a real estate bubble that burst in 2007.

Under the leadership of Saracho, who took over as chairman in February 2017, the lender struck a more cautious tone and said that an internal audit found it would have to revise down its 2016 results, when it booked losses of 3.5 billion euros.

The Spanish High Court is investigating the role of Ron and Saracho in Popular’s collapse due to complaints by shareholders.

The court is looking at allegations of false financial statements and investor fraud at Popular, according to law firm Quinn Emanuel, which represents a group of bondholders that wants to join the investigation.

Additional reporting by Francesco Guarascio in Brussels; Editing by Jane Merriman and Mark Potter

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