Bond redemptions leave NAMA ready to hit first €7.5bn debt reduction target

‘Bad bank’ has sold €7bn of assets and debt since 2010, but best UK assets may have gone first

Ireland’s National Asset Management Agency is on course to meet its first, €7.5bn debt reduction milestone at the end of 2013, according to its End-of-year update for 2012. The update says that NAMA has made cumulative senior bond redemptions of €4.75bn to date, with €3.5bn of those bonds redeemed in 2012.

Insiders said the bad bank’s management is “not complacent”, but confident that NAMA “is on course” to generate the remaining €2.75bn of the first tranche owed to the Troika – the EU, European Central Bank and IMF – by the end of this year.

The bonds were issued to pay €31.8bn for the €74bn of par loans NAMA acquired at a 58% discount during 2010-11. The update says NAMA has generated more than €10.5bn of cash since its inception in 2010, €7bn from sales of assets and debt. The balance is €3.6bn of recurring income, now running at more than €100m per month.

The next full accounts will be published in summer, but figures in the update for the six months to June 2012 showed NAMA made a €222m profit after tax, though that doesn’t necessarily reflect “a detailed impairment review being carried out in respect of the 2012 financial year”. NAMA made a profit in 2011 after impairments.

Surplus cash generated is not being used for accelerated debt repayment and €2bn was made available to lend on stalled projects or other capital expenditure via John Mulcahy’s asset management team. The update says that €1.7bn has been approved in advances to debtors, of which €1bn has been drawn down.

Bulk of sales in UK

The 700-strong asset recovery team, headed by Ronnie Hanna, has so far sold much more real estate in the liquid UK market than at home, with €4.3bn of the €7bn sales being in London.

But only 34% of the total book was in the UK. Some 54% was in Ireland, 4% in Northern Ireland and 8% in the US and the continent.

This has led to questions about whether NAMA sold its best assets first. But insiders said that when NAMA took over the portfolios from the five lenders, the assets, while “way over- leveraged”, were better than they had expected, with 71% generating investment income.

In another fillip, the Dublin property market has begun to move in NAMA’s favour. In January, Real Estate Capital reported on the €1.3bn of property assets and loans sold there last year and the interest from international buyers.

NAMA’s deals will increase significantly in Ireland this year and will include Irish loan portfolio sales for the first time, despite the sale of loans being politically sensitive.

First Irish portfolio on the block

NAMA had 40 bids for the first loan portfolio, the €810m Aspen package secured on property amassed by David Courtney, and is offering stapled finance.

Courtney is working with Starwood and Key Capital on a bid to buy back the loans and they are one of the front-runners (see News, p1). Eastdil Secured is advising NAMA on the sale.

“There is a view that it’s better to sell assets, but the reason [ for loan portfolio sales] is that we are going to get rid of bigger portfolios more quickly – and mixed product,” said a NAMA insider. “This is key for us and we will do more.”

Summer shake-up will see ‘bad bank’ inherit IBRC’s legacy

NAMA is facing another reorganisation, just 18 months after its last overhaul, which followed the publication of the Geoghan report.

At the end of August, it is due to take over any loans not sold by the special liquidator to the Irish Bank Resolution Corporation, after the bank was wound up on 6 February.

IBRC was set up separately from NAMA in 2009 to own many of Anglo Irish Bank’s assets and some from Irish Nationwide. Valuers are to be appointed by IBRC’s liquidator, KPMG, with a remit to revalue the €26bn (par) book by late June.

The NAMA Wine Lake blog points out that this is a very tight timetable – it took NAMA between four and six months to appoint valuers to value the €74bn (par) of loans it acquired and close to two years to complete their acquisition.

However, the valuers likely to be appointed – Savills, CBRE, Jones Lang LaSalle and Allsop & Co – last valued IBRC’s book two years ago, so this should speed up the process. As the valuations are completed KPMG will offer the loans for sale. Everything unsold at or above the new valuations will be sold to NAMA at the valuation price.