Commission established to examine Project Eagle

Despite recent revelations that the National Asset Management Agency (NAMA) is set to achieve its function of eliminating over €30 billion of potential bad debt liability for the Irish taxpayer, the agency has not been free from criticism, not least from the recent Public Accounts Committee report which described its strategy for the sale of its Northern Ireland portfolio as “seriously deficient”.

In April NAMA redeemed €952 million of senior notes leaving it with less than 2 per cent of its original debt. The second redemption of the year brought the total debt redeemed to €29.7 billion and leaves remaining senior debt at €500 million, significantly lower than the debt issued to acquire toxic bank loans in 2010/11.

However, despite the significant achievement, question marks still exist over some of the strategies utilised in the sale of assets. Most recently calls have been made for an investigation into the sale of the €455 million Project Tolka, which was not sold on the open market.

The portfolio that was sold at a discount of around 70 per cent, was part of a targeted marketing process that narrowed 16 potential bidders to three who met the minimum reserve price. Developers, whose loans were sold, also identified potential bidders later included among the initial 16.

Fianna Fáil’s finance spokesman Michael McGrath has stated that the deal could not be described as fully open and competitive when calling for the deal to be examined by the Comptroller and Auditor General. A reply by Finance Minister Michael Noonan stated that NAMA’s function was to get “the best achievable financial return for the State”.

A move for an inquiry comes at the same time as the establishment of a Commission of Investigation into Nama’s controversial sale of Project Eagle. The terms of reference announced by the Government seek to find out if the price and disposal method were appropriate, and if any conflicts of interest arose, and, if so, were they managed appropriately. The Commission was sought following a damning report of NAMA’s Project Eagle sale by the PAC. NAMA has been forced to defend itself after a report into the strategy for the sale of its Northern Ireland loan portfolio was described as “seriously deficient”.

Included in the €800 million recorded losses for the portfolio between 2010 to 2014, the PAC supported the C&AG’s original finding that the sale itself resulted in potential losses of £190 million for the Irish taxpayer and points further to ill-design in the sales process and failures of corporate governance. While the estimations of price and value of the assets at varying times are somewhat speculative and have been challenged by those contesting the report, other findings are more substantive.

These include a failure to remove businessman Frank Cushnahan at an earlier stage over conflicts of interest before his eventual resignation and a failure to inform NAMA’s board about potential losses by setting a £1.3 billion reserve price in 2014. The report also said that key elements of the eventual sale were “influenced” by Pimco, the US firm who expressed initial interest in buying the portfolio as a whole, but who later withdrew from the process.

NAMA responded to the finding that it failed to demonstrate that it got value for money for the sale by re-stating its belief that the sale provided a better financial outcome than any alternative monetisation strategy. A further hotly contested criticism included in the findings that the Finance Minister Michael Noonan’s meetings with eventual buyers Cerberus were “procedurally appropriate”. The report includes a letter from the Finance Minister contesting the finding.

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