On RTÉ’s Six One.
Chairman of Nama Frank Daly was interviewed by Brian Dobson.
At the very end of the interview:
Brian Dobson: “You still say tonight, that the taxpayer got full value?”
Frank Daly: “I say, absolutely, the taxpayer got full value for money. And I say it even more strongly now in a post-Brexit environment. If we were trying to sell that portfolio now – we would not get offers anywhere near £1.32billion).”
Watch back in full here
What loss did Nama make on the Project Eagle transaction?
Depends on how you define “loss”!
The Nama projection of its ultimate profit by 2020 is €2.3billion. If it hadn’t sold Project Eagle in 2014, and worked the loads out between 2014-2020, the ultimate profit would be €2.74billion. So, the loss is €440million*.
By selling the loans in 2014, Nama did not generate £1.68billion in projected net cash receipts by 2020 on those loans. Instead, it sold the loans for £1.3billion.
So, the loss is £380m (€444m). This loss arose from two decisions (1) the decision to sell in 2014 rather than manage the loans until 2020 and (2) the decision to sell the loans below Nama’s own valuation.
On the other hand, if you compare the safe value of the loans in 2013 (£1.3billion) versus the Nama valuation of the loans in 2014 (£1.49billion), the loss is £190million (€222m).
1- Nama has until 2020 to manage its loans so as to maximise their value for the taxpayer. Nama did not have to sell the loans in 2014; it could have managed the loans until 2020, which would have resulted in the loans generating £1.68billion, according to Nama’s own projections.
2- Nama used the proceeds from the sale of Project Eagle to redeem senior bonds which have a zero (technically a minus) interest rate. Nama could have used the proceeds from the Project Eagle sale to invest in its assets, but it didn’t; Nama used the cash to pay down its own debt which cost it nothing.
Report Extracts (which emphasis added).
“In a paper submitted to the Board for the December 2013 meeting (reproduced in Appendix C) the Nama executive sought the Board’s approval for the sale of the loans. The paper indicated that the total Nama debt for the loans at the end November 2013 was £1.98 billion – equivalent to 43% of the par debt.”
“Cash flow projections indicated that Nama would realise net receipts totalling £1.68 billion over the period 2014 to 2020 if it worked out the loans through the sale of the underlying assets in line with its formal strategy.”
“The minimum price of £1.3billion set for the sale of the Project Eagle portfolio was significantly less than Nama projected it would realise from working out the loans – an estimated £1.68billion, equivalent to £1.49billion in NPV terms, using Nama’s standard discount rate.”
“The difference between the minimum price and the projected NPV of the workout was up to £190million, depending on the extent to which the adjustment of the 2017 disposal proceeds was valid.”
“As a result, the decision to sell the loans at £1.3billion involved a significant profitable loss of value to the State.”
“Ultimately, the loss incurred when the sale was completed was recognised in Nama’s financial statements for 2014.”
Independents 4 Change TD Mick Wallace writes:
“For too long the Minister for Finance and Taoiseach have displayed breathtaking indifference, and at times arrogance, to any form of oversight of NAMA.
The C&AG report deals with just one aspect of NAMA’s operation – if the Government want all the truth in the open, only a truly Independent Commission of Investigation has any chance of exposing just how dysfunctional this organisation has been, and what the cost has been to the people of Ireland.
Until then, the proceeds of the sale of Project Eagle should be frozen, under the ‘Proceeds of Crime Act’ and all NAMA activities should be suspended.“
Previously: Project Eagle And the €3.5billion Haircut