BlackRock and other international asset managers are seeking an injunction to block the sale of Novo Banco, the Portuguese lender that Lisbon has agreed to sell to a US private equity fund.

The fund managers, which are stepping up a legal battle over losses sustained in 2015, said in a statement on Monday that “the rules governing the [Novo Banco] sales process are discriminatory and breach Portuguese and EU law.”

A group of 14 asset managers including BlackRock, Pimco and Elliott Management took legal action in 2015 after €.2.2bn of senior Novo Banco bonds were transferred to a so-called bad bank, effectively wiping out their value.

The case shook European markets early in 2016, with risky bank bonds in peripheral Europe falling sharply in price after the losses were imposed.

BlackRock and some other unidentified members of the group of 14 would this week “seek an injunction to block the sale of Novo Banco”, the statement said.

The Bank of Portugal announced on Friday that it had reached an agreement to sell 75 per cent of Novo Banco to Lone Star, a US private equity fund, in exchange for a capital injection of €1bn. Portugal’s bank resolution fund is to retain the other 25 per cent.

The deal culminated more than two years of efforts to sell Portugal’s third-largest lender, the so-called “good bank” salvaged from the ruins of Banco Espírito Santo in 2014.

The sale requires approval from the EU and the European Central Bank and could take several months to complete. It is also dependent on senior bondholders agreeing to convert €500m of senior Novo Banco bonds into new, higher-risk bonds to strengthen the bank’s capital.

The asset managers said concluding the sale would “impair their clients’ claim against Novo Banco and their clients’ ability to recoup losses.”

The transfer of bonds to the “bad bank” in 2015 had caused “losses of around €1.5bn for ordinary retail investors and pensioners”, the statement said. It added that media reports that the bank resolution fund would “provide a €4bn guarantee” to Lone Star demonstrated that “the Bank of Portugal has the means, but not the commitment, to resolve the ongoing dispute”

Under the sales agreement announced on Friday, the resolution fund is committed to injecting fresh capital into Novo Banco if its capital strength falls below regulatory requirements. But this clause will only be triggered if the capital shortfall results from impairments on designated problem loans.

Two weeks ago, Pimco and BlackRock boycotted the first Portuguese bank bond sale in over a year from state-owned lender Caixa Geral de Depósitos, citing the ongoing Novo Banco legal proceedings. They also released a statement that week saying the Bank of Portugal’s action “has come at a heavy cost to the Portuguese taxpayer”.

Over the past year, the yields on 10-year Portuguese sovereign debt have crept higher, especially compared to neighbouring Spain.

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