Nama explored sale of entire loan book prior to Project Eagle sale
Political uncertainty cited as a reason for not selling off the agency's assets in one go, writes Gavin McLoughlin
Nama employed Swiss financial-services giant UBS to evaluate whether a sale of the agency's entire loan book would be feasible, just months before the controversial purchase of the Northern Ireland portfolio by Cerberus.
The evaluation was done as part of a legally obligated review, known as a Section 227 review, of Nama's progress. UBS said multiple factors militated against such a sale, with one being the prospect of a "near-term general election with an uncertain outcome".
The details of the review are contained in a letter written to Finance Minister Michael Noonan last March by Nama's top bosses, chairman Frank Daly and chief executive Brendan McDonagh.
Daly and McDonagh said they asked for "an update to Nama on the viability of an enterprise sale in the context of current global market conditions".
"Since UBS last reported to the board of Nama in May 2014, real-estate markets have continued to improve and the fair value of the loan portfolio has been substantially reduced through sales. All else being equal, this improves the viability of an enterprise sale."
But the Swiss company said that in addition to the political uncertainty, there would only have been two investors in the world who would have been able to cut a deal of that size - and that they were unlikely to want to make such a large, geographically-concentrated investment.
"UBS believes that, in practice, the purchaser under an enterprise sale would be a consortium assembled for the purpose. The related debt financing would also require a syndicate of lenders that would likely reach double figures given the overall commitment, putting upward pressure on borrowing costs," McDonagh and Daly's letter says.
It also said the complexity of the loan book would mean "an almost insurmountable challenge for a purchaser to underwrite it".
A Nama spokesman said: "This option was examined as part of Nama's wider Section 227 review. The Nama board took the decision not to proceed with it as the strategic option ultimately taken represents a better outcome for the taxpayer.
"It is no longer under active consideration. The stance adopted by the board in 2014 and again in 2015 (that its existing strategy would optimise value) has been borne out by the results of 2014 and 2015 asset-disposal activity. Nama reviews strategy on an ongoing basis to ensure that its strategy will deliver the best achievable outcome for the taxpayer."
Sunday Indo Business