Business Irish

Saturday 16 December 2017

NAMA repays more than €1bn of debt in its first year

Emmet Oliver

NAMA, THE state loans agency, has repaid more than €1bn of debt in its first year of operation, its chairman announced yesterday.

The agency paid €30.5bn last year for €72.3bn of loans, and as the agency sells assets and generates income it's in a position to reduce its overall debts.

The agency yesterday broke down its debt repayments to date:

  • The agency will repay €500m of NAMA bonds this week.
  • About €250m of bonds were repaid in March.
  • NAMA also repaid €299m of loans to the Minister for Finance in February. This money was given to NAMA as its first tranche of working capital.

Frank Daly, the chairman of NAMA, said the latest reduction in debt was significant: "This is further evidence of NAMA doing what it was set up to do; ensuring the repayment of loans by debtors, managing those debtors very carefully, and using the proceeds to repay the bonds NAMA issued to fund the whole project.''

NAMA applied an average haircut of 58pc for its loans across the guaranteed banks. These banks are then able to put up these bonds as collateral with the ECB in exchange for cash.

In order to protect the agency from a worse than expected performance from the loans it has bought, some of the bonds it issues to the banks are subordinated, meaning they don't necessarily have to be repaid.

NAMA also has powers under the NAMA Act to levy banks later on, if the agency ends up in a loss-making position when it winds up. This has made some investors nervous, suggesting that Irish banks could be stuck with paying NAMA compensation for many years in advance.

"Ultimately NAMA intends to buy back all outstanding NAMA bonds over the lifetime of the project, and any remaining cash held by NAMA will represent its profit after other expenses are taken care of,'' said the agency yesterday.

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