NAMA to raise €2.5bn to finance itself as it seeks loans clawback
Published 09/09/2010 | 05:00
NAMA looks set to raise €2.5bn in borrowings to fund its operations as it tries to return value to the taxpayer on €40bn of loans.
The agency, which is buying loans from five different institutions, has been given its first credit rating for a commercial paper programme worth €2.5bn. The programme has attracted an A-1 rating from Standard & Poor's (S&P), but has an AA- long-term rating from the agency.
The rating arises because NAMA has an "unconditional, irrevocable and timely guarantee'' from the Irish Government covering all of its liabilities.
The agency has powers to raise up to €5bn, which can be used for a variety of purposes, including working capital, to purchase derivatives and also smooth out liquidity bottlenecks.
The agency was hit a blow on August 24, when its long-term rating was lowered to AA- in line with an S&P downgrade of Ireland itself.
S&P cited the rising costs of bank bailouts for its decision. It put the final cost of Anglo Irish Bank at €35bn, a figure not accepted by the Government or the National Treasury Management Agency. NAMA is controlled by a special-purpose vehicle known as the National Asset Management Agency Investment Ltd (NAMAIL).
NAMA has 49pc of the shares in this entity, with the remainder controlled by private investors.
"Notwithstanding its minority stake in NAMAIL, in our opinion the Government has effective control over NAMAIL's operations, to be exercised through NAMA's government-appointed board of directors who have veto power,'' said S&P in a fresh note.
NAMA will pay government bonds for the loans it is purchasing, with the remainder being bought using NAMA subordinated bonds.
Commercial paper is short-term debt borrowed typically over 270 days. When governments and state agencies use the borrowing, it tends to roll over endlessly without being called in. However if the market grows concerned about the borrower this supply can quickly dry up.
"The programme will benefit from the Irish Government's guarantee," said S&P.
"We view the guarantee as being unconditional, irrevocable, timely and in line with our criteria.
"The purpose of the issuance is to finance the general operations of NAMA and NAMA group entities."