You’d think buyers would be queuing up around the block of Upper Merrion Street following the decision of the Government to sell the 17% of NAMA currently owned by Irish Life Investment Managers. Well, too late, the stake has already been sold!
Although we all regard NAMA as a government agency, back in 2009 the Government was careful to structure NAMA so that its debts would stay off the national balance sheet. So the Government enticed/strong-armed three “third party independent investors” to take majority ownership of NAMA, the three being Irish Life Investment Managers (part of Irish Life and Permanent), New Ireland Assurance (part of Bank of Ireland) and Allied Irish Banks Investment Managers (part of AIB originally but sold in November 2011 to a South African investment group). Each of these three investors handed over €17m apiece for a 17% stake in NAMA and the Government put in the remaining €49m so that NAMA started out in life with a €100m capital base.
That’s the history lesson concluded. Fast-forward to today and the Government is set to take 100% control of Irish Life so the State will own not just 49% which allows NAMA’s debts to stay off the national balance sheet but 66% which would likely mean NAMA’s debts – mostly its €28bn of bond which this State has guaranteed – would come onto our General Government Debt pushing our debt next year up from 119% to 138%. This is largely academic of course if you believe that NAMA’s assets will be sufficient to pay off the NAMA bonds by 2020. NAMA has recently reported a profit for 2011 of €200m after a loss of €1,100m in 2010 and who knows, maybe it will break even or make a profit but it is a risk and the ratings agencies which examine Ireland’s ability to repay debt, generally regard NAMA’s bonds as part of the national debt with a caveat that they are backed up by assets, but that there is risk to the value of those assets.
However the Minister for Finance, Michael Noonan is taking no chances and the Department of Finance has announced this morning that the Irish Life shareholding in NAMA has been sold to “private investors” The Minister says in the statement
“The Minister also noted the reservation in relation to the ownership of the NAMA SPV, which the Department had previously acknowledged. He is not concerned by the reservation as the sale of the Irish Life shareholding to private investors has just been agreed. It is anticipated that the transaction will be completed in the coming weeks and this will ensure that the reservation will be lifted and the statistical treatment of NAMA will be unchanged. The effect of the sale will mean that NAMA will continue to have absolutely no General Government impact. In addition, it is worth noting that provisional figures indicate that NAMA has posted a profit of €200m in 2011 and has very sizeable cash reserves.”
Who might the “private investors” be? We don’t yet know but I can’t see any completely independent third party investor wanting to take the stake, the terms of which are examined here – and which allowed the third party investors to walk away with a dividend of €5.093m in 2010 despite NAMA making a loss of €1.1bn.
For information, Irish Life Investment Managers, the outgoing shareholder, describes itself as “the asset management arm of Irish Life & Permanent plc. ILIM manages money on behalf of a wide range of clients from large multinational corporations, charities and domestic companies. Currently managing assets of in excess of €30bn”
UPDATE: 2nd May, 2012. Minister Noonan said in the Dail yesterday that “my Department has been notified that the sale of the Irish Life shareholding in the NAMA SPV to private investors has been agreed and it is anticipated that the transaction will be completed in the coming weeks”
UPDATE: 26th May, 2012. Minister Noonan is still not revealing the identity of NAMA’s new shareholder, replying to a Dail question the Minister said “the identity of the new private investors will be made public in due course when the deal is completed”