Tuesday 17 October 2017

Nama poised to meet its key debt target three years early

Frank Daly, Chairman of NAMA. Photo: Tom Burke
Frank Daly, Chairman of NAMA. Photo: Tom Burke
Donal O'Donovan

Donal O'Donovan

Nama is poised to pay off the last of its Government guaranteed debt, three years ahead of schedule.

It is understood that the move will not bring forward Nama's final timeline to shut after 10 years in 2020, but lifting the debt burden may free the agency to make greater use of funds it receives for sales of assets, of which as much as €4bn remain to be sold.

It is understood the final €500m payment from the original €30.2bn of senior bonds will be paid within weeks.

The senior bonds were used to buy vast numbers of property loans from the banks in the wake of the financial crash.

Nama chairman Frank Daly said removing the so-called "contingent liability" for taxpayers means the agency has delivered on its core objective.

"Today we have delivered on Nama's core objective - an objective many people thought unachievable at the outset.

"This reflects the enormous progress that Nama has made since its first loan acquisition over seven years ago," he said.

Finalisation of details on the last payment, which will go mainly to AIB and Bank of Ireland, is expected within weeks.

A remaining €1.2bn of so-called subordinated debt will still be owed by Nama, but isn't due to be repaid until 2020. Unlike the bulk of the Nama debt, the subordinated bonds were never guaranteed, so if Nama had failed to pay that back taxpayers weren't on the hook.

A relatively small €56m is also owed to Nama shareholders.

Nama's debt repayments have accelerated rapidly in the past three years, as by 2013 just €7.5bn had been paid back to the banks, from asset and loan sales and money raised in rents and interest on Nama-controlled property and loans.

The remaining €20bn-plus has been raised and repaid in the interim.

Nama CEO Brendan McDonagh said redeeming the debt three years ahead of schedule was significant, and that early repayment had boosted the State's ability to borrow on the markets. "The progress made in reducing the guranteed senior debt by two-thirds between 2014 and 2016 contributed substantially to the strong performance of the Irish economy and to the ability of the State to fund itself and to achieve reductions in the funding cost if Ireland's debt," Mr McDonagh said.

He told the Irish Independent that Nama's decision in 2010 to substantially sell off overseas assets, in particular in the UK, had been a significant move, and means the agency now has an exposure of just €500m to the UK housing market as it faces into Brexit.

Pumping more than €30bn back into the bailed-out Irish banks had helped AIB and Bank of Ireland to move towards privatisation, he said.

While Nama has reduced the scale of assets it manages, and has shed significant staff numbers as a result, the agency's chief expects that the final sales of assets and ongoing legal cases where the agency is a party will run right to the end of its 10-year term.

In numbers

€71.2bn

Total loans of 850 borrowers transferred from banks

€30.2bn

Amount paid in Nama bonds for the loans representing ‘haircut’ of 58pc

€41bn

The hole left in the banks’ balance sheets to be filled by the taxpayer

€299m

The amount advanced to Nama from the Central Fund (ie the taxpayer) by September 30, 2010

Irish Independent

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