Tuesday 20 March 2018

New NAMA stakeholder linked to earlier deal criticised by UK regulator

Brendan McDonagh, NAMA chief executive and Frank Daly, NAMA chairman
Brendan McDonagh, NAMA chief executive and Frank Daly, NAMA chairman
Donal O'Donovan

Donal O'Donovan

The new owners of a 17pc stake in the National Asset Management Agency (NAMA) were previously linked to a multi-billion investment vehicle heavily criticised by the UK's financial regulator.

State-owned Irish Life has announced the sale of its stake in the so-called "special purpose vehicle" (SPV) set up back in 2010 to bring private investors into NAMA. It was bought by London-based Walbrook Capital for an undisclosed fee.

The stake has been on the market since April. A sale was needed to prevent Nama's debts of €28bn being counted as part of the national debt by the European statistics agency.

It means the sale is good news for the national finances, but the revelation that the leading figures at new owners Walbrook have been linked to a high-level probe in the UK is sure to raise questions about the wisdom of selling such a sensitive holding to little known private investors.

Nama's assets are effectively State controlled but it is not officially state owned. Formal ownership is through a €100m "special purpose vehicle" called National Asset Management Agency Investment Ltd (NamaIL).

The Government owns 49pc of NAMAIL, but it is majority owned by three private investors: New Ireland Assurance, Percy Nominees (formerly AIB Investment Managers), and now Walbrook.

The structure, designed to keep NAMA's debts from being counted as part of the national debt, came under threat when the state took control of Irish Life, bringing its NAMA stake back into Government hands.

In April, the European statistics agency Eurostat told the Government to find a buyer for the stake, or see the official national debt shoot.

That buyer has now been found after a seven-month hunt, and Eurostat said yesterday that it is now happy to treat Nama's debt as separate to the national debt.


But the deal is sure to raise eyebrows, not least given the heightened sensitivity over everything to do with NAMA.

Walbrook Capital is controlled by a group of former Barclays Capital bankers, who left the banking giant in 2009 to set up a fund called C12.

Through C12 they bought $12.3bn (€9.4bn) of risky assets knows as the "Protium" portfolio from Barclays in a deal financed with a similar amount of loans from the same bank.

Market watchers say it allowed Barclays to change the way the $12.3bn was treated in accounting terms, without really changing the bank's exposure to the portfolio which included troubled property loans.

Barclays bought back the assets last year after a tightening of capital rules wiped out its savings under the scheme, but it was not enough to stop regulators blasted the Protium manoeuvre.

The chairman of the UK's Financial Services Authority (FSA) Lord Turner called Protium "a convoluted attempt to portray a favourable accounting result." He said pricing of the deal was "at the aggressive end of the acceptable spectrum."

It was just one of a number of criticisms of Barclays levelled by Lord Turner in a letter to the chairman of the bank, later seen by members of the British Parliament.

A spokesman for NAMA said the agency was aware of Lord Turner's letter but that the criticism was directed at Barclays, not buyers C12. Walbrook was established last year as a separate venture out of what had been the London office of C12.

A spokesman for Walbook declined to comment on the content of Lord Turner's letter yesterday.

However, a source at the firm said that regulators had never taken action against any party to the transaction, even after looking at the deal.

The sale to C12 was reversed, without difficulty, when the structure became expensive for Barclays, not because authorities demanded it, the source said.

Irish Independent

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