Last October 2012, when NAMA was asked about its internal processes for selling loans, it was very coy with Minister for Finance, Michael Noonan responding on its behalf that revealing certain details would undermine the Agency’s commercial mandate. Today, we get a lot more detail on how NAMA does in fact sell loans.
We learn today that NAMA has now disposed of €2.4bn of loans up to the end of December 2012, up from €1.9bn to the end of March 2012. These are the original book values of the loans.
Just a week ago, the UK’s commercial property portal CoStar reported that NAMA was “currently in the process of assembling a €230m-sized portfolio” and there was a blogpost on here recently on Ireland’s burgeoning loan sales industry. So, loan sales have become big business and we should know more about how NAMA sells loans.
The Sinn Fein finance spokesperson Pearse Doherty today asked Minister Noonan if NAMA was selling loans off-market, and in response was told that only in cases where there is an offer to buy loans at their original book value plus accumulated interest would NAMA sell loans off market. So, taking Minister Noonan’s words at face value, NAMA has not been selling loans below book or par value, off-market.
There remains some question over whether NAMA can sell loans for a premium above their book values. Take the €800m of loans relating to Paddy McKillen’s Maybourne hotel group. These were sold by NAMA to the Barclay brothers at par, but there was no secret about the Barclays’ intentions of using the loans as a plank in their bid to gain overall control of the Maybourne hotels. They were a “special purchaser” and it remains the case on here that NAMA might have sold those loans for a premium above their book or par values.
These are the two full parliamentary questions and responses.
Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Questions 179, 180, 181 and 182 of 16 October 2012, if the National Asset Management Agency sells loans without placing such loans. on the open market.
Minister for Finance, Michael Noonan: I am advised by NAMA that its policy in relation to loan sales, as with the sale of properties by its debtors and receivers, is that they should, where practicable, be openly marketed. For this purpose, two panels of loan sale advisors have been approved for loan sales in the US and in Ireland/Britain/Europe.
NAMA advises that, to date, it has chosen in a number of cases to sell loans through loan sale brokers in the US and in some continental European jurisdictions where the sale of loans is a widely practiced method of realising the value of the secured property. In Ireland and Britain the sale of loans has mainly been in response to approaches to NAMA by third parties. NAMA advises that, after receiving such approaches, loan sale brokers have been appointed to market the loans and to deal with offers from the original bidder and other interested parties.
NAMA advises also that in certain cases a loan sale may follow the open marketing of the related property. NAMA points out that in a limited number of cases where properties or portfolios of properties have been openly marketed, the preferred bidder has ultimately suggested acquiring the related loans rather than the properties, with the value of the loans fully reflecting the successful bid for the underlying property.
NAMA advises that in situations where an offer of full par value is received for a loan, there is no merit in further marketing the loan if NAMA has no entitlement beyond the full repayment of the loan. In such cases, a loan may be sold without open marketing.
Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Questions 179, 180, 181 and 182 of 16 October 2012, to confirm the original book value of loans sold by the National Asset Management Agency since his response.
Minister for Finance, Michael Noonan: I am advised by NAMA that the original par value of loans sold from inception to end-December 2012 is €2.4 billion.
I am further advised by NAMA that this is not a metric they would typically release in isolation as it does not reflect the true progress of NAMA’s resolution of its portfolio. I would encourage you to read the 2012 year-end review available on NAMA’s website which provides a more complete picture of NAMA’s progress to date.