Tuesday 24 April 2018

Agency paid more than €6m for legal advice on loan sale

Nama is housed in the Treasury Building in Dublin. Photo: Steve Humphreys
Nama is housed in the Treasury Building in Dublin. Photo: Steve Humphreys
Shane Phelan

Shane Phelan

Nama's legal advisers on the Project Eagle deal were paid over three times the "fixed rate" agreed with them.

The legal costs were among Stg£5.42m (€6.36m) in professional fees paid by Nama in connection with the loan portfolio sale.

Multinational law firm Hogan Lovells was appointed by Nama in February 2014 on a fixed fee rate of Stg£290,000 (€340,000).

However, the agency ended up paying the firm Stg£1.1m (€1.3m).

In addition to the legal fees, Nama paid London-based loan sale advisers Lazard Stg£4.32m (€5m) for its work on the deal.

Details of the fees are contained in the damning C&AG report on the sale.

While Hogan Lovells was appointed following a tender process, board minutes show Lazard was appointed without any tender. The board approved a recommendation from the Nama executive that, in view of "project sensitivities", Lazard be hired outside the usual process.

Nama said the fee initially agreed with Hogan Lovells did not cover the entire transaction as the full scope of what would be involved had not been identified when a request for tender was issued that January.

The initial fixed fee had been expected to cover the amount of work associated with the operation of a virtual "data room" housing documents on loans.

This could be accessed by potential bidders so they could do due diligence.

A Nama spokesman said the amount of work grew and as a result the additional fees were incurred.

Fees paid to Lazard comprised of three elements, the report said. The first of these was a payment of Stg£4.24m (€4.98m), representing 0.35pc of the final sale price.

A second element was a payment of Stg£71,500 (€84,000). This was an extra 0.65pc payable on the part of the sale price above the minimum price set by Nama. Lazard also received "out of pocket expenses" of Stg£11,193 (€13,150).

The C&AG said the rates paid to Lazard were similar to rates agreed with loan sale advisers for Project Tower, which related to loans on properties and land banks in Ireland, Britain, Spain and Germany.

However, the fees were almost double the rate paid to loan sale advisers on Project Arrow, a portfolio of mainly Irish property loans.

Board meeting minutes deemed 'unsatisfactory'

The Comptroller & Auditor General criticised the manner in which notes were taken of key decisions by the Nama board about the sale of the Project Eagle loan portfolio.

Seamus McCarthy found that Nama did not keep an adequate record of events, despite the fact the sale process "deviated from standard".

He said it was important for records to be kept of reasons for departures from usual procedures.

"Minutes of meetings cannot practically record everything that is said, or every argument made," the C&AG said.

"Nevertheless, it is particularly unsatisfactory that board minutes would not clearly record the basis upon which critical financial decisions were made."

He found the minutes did not record clearly the basis for the board's decision about the minimum price it would accept for the portfolio.

Mr McCarthy said Nama did not accept his criticism that the minutes did not record clearly the basis for the decision.

Irish Independent

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