In January 2012, NAMA appointed two panels of companies to provide “loan sales advisory” services – a European panel and a US panel. There are 13 companies on the European panel and 10 on the US panel. According to reliable sources, it appears that NAMA has now plumbed for one US company to sell off most of its legacy US loans. The company is the Boston-headquartered The Debt Exchange or DebtX and it is understood that over the next three months, DebtX will seek to sell off most of NAMA’s legacy loans in the US.
According to the 2011 NAMA annual report (see above), some 16% of its non Ireland/UK portfolio of loans relates to US assets so the loan sale could top 16% of €2.7bn or just over €420m at NAMA values – NAMA paid an overall total of €32bn for its loans, of which €2.7bn are related to property outside Ireland and the UK. We don’t know what haircut NAMA applied to US loans but if it paid 43c in the euro as it did on average across its entire portfolio, then the US loans could be worth €1bn at book values but the betting is the US loans hadn’t deteriorated to the same extent as loans in Ireland, so the book value could be substantially less .
DebtX is a reasonably well-known firm in the USA. Its basic value proposition is access to the largest number of (distressed) loan buyers. It is most experienced in selling commercial mortgages in the USA though it also has a large portfolio of US residential non performing loans from FreddieMac and the US Dept of Housing and Urban Development. The company has tried to develop business across Europe over the past eight years, but industry sources claim it has had little success.
Their business model is to establish a minimum portfolio valuation with the seller-client, in this case NAMA and presumably NAMA will want to recover at a minimum what it paid for the loans; DebtX then markets the portfolio and organises bids – bidding similar to the way an estate agent generates bids - and DebtX earns a high fee when the portfolio sells for a price above the agreed threshold and no fee at all if it sells below the threshold.
It seems that NAMA is accelerating the disposal of non-Irish assets, though given the chronic lack of credit and vertiginous price falls in Ireland, perhaps that is understandable and it seems the future NAMA strategy will be to focus on loans and assets in this jurisdiction where familiar geography, politics and markets can be more easily managed. Indeed it would have been surprising if NAMA seriously considered a ‘hold and loan service’ strategy in the US because it would need rely on many remote third parties.
Neither NAMA nor DebtX had any comment on the matter at time of writing.
UPDATE: 18th September, 2012. The NAMA spokesperson from Gordon MRM has responded to a request for comment on the claim that DebtX has been appointed to dispose of a NAMA US portfolio to say “that information is incorrect”.