€223m 'lost by Nama' in Project Eagle sale
Agency rejects C&AG's claims and questions expertise
Published 15/09/2016 | 02:30
The State's financial watchdog has found there was a potential loss to the taxpayer of Stg£190m (€223.5m) from the sale of Nama's Northern Ireland loans portfolio, Project Eagle.
In a damning report, Comptroller & Auditor General (C&AG) Seamus McCarthy raised questions over how the portfolio, at the time the biggest property sale in Irish history, was valued and marketed.
Mr McCarthy also criticised Nama's failure to take more action when it learned a former adviser, controversial business consultant Frank Cushnahan, stood to be paid Stg£5m by one of the bidders.
But in an unprecedented attack on the C&AG, Nama rejected many of the report's findings last night, claiming some of Mr McCarthy's main conclusions were based on incorrect assumptions. It said Mr McCarthy had not sought out international experts who, the agency said, concurred with Nama's decision to apply a 10pc discount to the portfolio.
The portfolio, comprising of loans to Northern Irish debtors linked to more than 850 properties, was sold to US vulture fund Cerberus for Stg£1.241m (€1.6bn at the time) in April 2014.
But the deal has been mired in controversy over the past year, amid allegations of corruption and plans to make secret payments to politicians and businessmen.
Amid the unfolding controversy Nama has always maintained it acted appropriately and achieved the best possible return for the taxpayer.
But these arguments were sharply contradicted by the C&AG report. It found:
* Nama lost Stg£190m on the deal by applying a discount rate of 10pc, rather than its usual 5.5pc discount on the loans;
* Arguments by Nama that it needed to increase the discount due to the poor quality of the properties, weak market conditions, fractious relations with debtors and political considerations in the North was "not persuasive";
* No reference was made to the increased discount in papers presented to the Nama board;
* Nama departed from its normal loan sale process in this sale;
* Restrictions Nama implemented, relative to its standard process, reduced both the level of competition and the opportunity for potential bidders to assess the value of the portfolio;
* Information about Mr Cushnahan being in line for fees from a bidder warranted more action by Nama;
* It should have sought advice from the compliance support unit of the National Treasury Management Agency or contacted Mr Cushnahan seeking an explanation;
* Instead, Nama relied on a assurance from winning bidder Cerberus that neither Mr Cushnahan nor anyone else linked to Nama stood to receive a payment in relation to the deal;
* Nama's sales adviser Lazard was not briefed on the disclosures, or asked for its assessment of the potential implications;
* Nama adopted "a narrow approach", focusing on its legal obligations, rather than considering other actions after receiving the information about Mr Cushnahan.
Nama said last night it "categorically" rejected the conclusions.
It claimed key finding on the size of the discount were based on an incorrect assumption about the discount rate used to value Northern Ireland loans.
"It incorrectly assumes Nama should apply the same discount rate to poor quality Northern Ireland loans as it did to much higher quality assets in Dublin and London," the agency said in a statement.
It also claimed that the report was "carried out by C&AG staff with no market experience of loan sales".
Nama chairman Frank Daly told the Irish Independent he was satisfied the agency acted correctly at all times and that it would not do anything differently in hindsight.
He said there had been no point in contacting Mr Cushnahan as he had left Nama and the bidder with whom he had a proposed fee arrangement withdrew from the sales process.
The row between both sides looks set to continue in a fortnight when they will appear before the Dáil Public Accounts Committee.
Mr McCarthy will be given an opportunity to explain how he reached his findings at the hearing.
The publication of his report came at the Cabinet decided to launch an inquiry into the Project Eagle sale.
However, the format of that inquiry will not be decided until after the Government holds discussions with Opposition parties.