Business Irish

Friday 24 February 2017

Turmoil forces NAMA to stall bond plan

Emmet Oliver Deputy Business Editor

NAMA has been hit by the decision of Ireland to pull out of the bond market with the toxic loans agency putting its own plans to borrow €2.5bn in finance on hold for now.

NAMA agreed in May to raise €2.5bn for joint ventures and project finance and wanted to issue a long-term bond, with plans to have a prospectus ready within weeks.

With Ireland now out of the bond market, the agency's financing plans are up in the air. The bond would have had a guarantee from Finance Minister Brian Lenihan but its not clear whether NAMA will seek financing via the funds coming to the Government from the IMF/EU bailout package.

The agency does have a commercial paper programme -- short-term borrowing which matures in under a year -- in place for €2.5bn that reduces the pressure, but it needs the long-term money that comes from a bond issue to enter long- term property projects which are key to NAMA recovering the money it is spending on land and development loans.

With Ireland potentially out of the bond market for up to three years, the difficulty for NAMA in raising money could grow. Under the NAMA Act, the agency or one of its subsidiaries can borrow up to €5bn to fund its operations. Earlier this year the agency funded itself via a loan from the Department of Finance for €250m and this was repaid once the commercial paper facility was available.

The short-term euro commercial paper is used to fund short-term cashflow requirements and provide "liquidity buffers''. The long-term borrowings would mature in between two to 10 years and one of the uses of the money would be joint with other banks to develop and complete certain property projects. NAMA has inherited stakes in a large number of syndicated loans and in many cases the agency will be required to stump up further money on these projects, either as part of refinancing or because the cost of the project itself has grown.

A specific code of conduct is in place governing how NAMA deals with other banks who are partners in joint loan agreements. NAMA is not allowed to simply impose its rights above those of other lenders. Earlier this year NAMA got its own credit rating, but this is likely to be downgraded in line with downgrades for Ireland's sovereign debt.

NAMA has its own treasury department that manages the agency's funding. One of its key tasks is to avoid so-called mismatches where debt repayments get out of kilter with its income from property.

nama has failed so far: Siobhan creaton, page 2

Irish Independent

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