NAMA makes €140m profit on Anglo loan deal
Published 26/10/2010 | 05:00
THE National Asset Management Agency (NAMA) has turned a €140m profit on a loan it bought from Anglo Irish Bank for just €40m.
The massive windfall, which will raise eyebrows across banking and political circles, marks one of the first asset sales to be secured by the 'bad bank'.
Full details of the transaction have yet to emerge, with both NAMA and Anglo declining to comment last night.
However, the Irish Independent understands Anglo had valued the loan at €80m before NAMA took it over for €40m.
The loan was secured on a commercial property in London which was sold to a Middle Eastern investor for €180m.
All that €180m will now flow into NAMA's coffers, leaving the State's bad bank with a €140m profit on the loan.
Sources last night described the outcome of the deal as "exceptional".
It is understood the investor also owned adjoining buildings and was therefore willing to pay a premium for the site.
But the windfall will still raise questions about NAMA's sweeping powers and the potentially devastating impact they could have on banks stung with massive losses.
Every €1m NAMA underpays for Anglo's loans will go directly to the cost of the bank's massive bailout, which is billed at between €29bn to €34bn.
Some sources described the deal as a triumph for the NAMA project, suggesting the state agency had gotten far more value from the loan than any one bank could have.
The borrower at the centre of the deal is understood to be dealing with Nama on a raft of loans that were originally given by several different banks.
The original value of the Anglo loan is unknown, but if Anglo was owed less than €180m then it would only have gotten back the amount it was owed.
Crucially, there would have been no one to force the developer to use the rest of the money to pay back other debts that had nothing to do with the building he sold. The extra money could have been used to fund a luxurious lifestyle or could have been channelled overseas.
Under NAMA, however, all a developer's debts are bundled together. If a developer makes €200m from selling a building he only owed €170m on, all €200m will flow into NAMA where it will be offset against his total debts from different banks.
Holding loans from across several different banks also means NAMA is empowered with a variety of securities, including personal guarantees, which can be used as leverage to compel borrowers to co-operate with asset sales.
The €180m deal makes up a substantial portion of the €500m in asset sales Nama expects to complete by the end of the year.