The vampire squid, Goldman Sachs, selected by NAMA to advise on loan sales

It was yesterday disclosed that NAMA had decided on the winning bidders for its tender to provide the Agency with “loan sale advisory services” – the NAMA PDF version of the panel members is here. These appointments are seemingly to address NAMA’s intention to sell loan portfolios, something it has been doing for over a year – the Maybourne €800m deal and the €300m Cyril Dennis loans, being examples. 2012 might see sales of loans being ramped up, and we may see loans being packaged – so Developer A and B and C who each have loans for Poland, for example, might see their loans packaged together and sold in one lot.

There might be some names on the list of panel members which are unfamiliar to an Irish audience, particularly those in the USlike “The Debt Exchange” and Houlihan Lockey. I see that NAMA has appointed Brookland Partners as an advisor in the UK, and I note that Brookland has been closely involved in examining the NAMAed Noel Smyth Alburn investment vehicle in the UK. But one name which is all too familiar is Goldman Sachs, which is to this day blamed for much of the sovereign debt crisis in Europe and which Rolling Stone magazine has dubbed “a great vampire squid wrapped around the face of humanity” – “vampire squid”, that’s a term that stuck. More specifically, Goldman was slapped with a near-record GBP 17.5m (€20m) fine by the UK’s Financial Services Authority in 2010 for failing to disclose that one of its employee at the centre of a fraud investigation in theUS, was working in theUK.

In Ireland, I saw that Goldman Sachs was one of the first organisations that Minister for Finance, Michael Noonan met when he got his feet under the desk of his new ministry last March 2011. And Goldman Sachs have been retained by other state agencies as revealed in this Parliamentary Question in July 2011 (see below). The appointment to NAMA’s panel may raise some eyebrows.

“In response to the Deputy’s question, Goldman Sachs has not been retained professionally by my Department. The National Treasury Management Agency (NTMA) appointed Goldman Sachs International, following a competitive tender process involving a number of advisory firms, as advisors as part of its Banking Unit’s involvement in overseeing the capital raising exercise of the four financial institutions (Allied Irish Bank, Bank of Ireland, EBS and Irish Life and Permanent), following the announcement of the results of the Central Bank’s PCAR/PLAR process on 31 March 2011. Fees of up to €7.8m may be payable to Goldman Sachs depending on completion of transactions and performance.

I am informed by the National Treasury Management Agency (NTMA) that it expects to recoup the external advisory fees associated with the NTMA Banking Unit’s involvement in the oversight of the capital raising exercise from the four financial institutions (Allied Irish Bank, Bank of Ireland, EBS and Irish Life and Permanent). The fees include the costs associated with achieving burden-sharing with holders of subordinated debt together with costs in relation to raising of additional capital. Goldman Sachs Asset Management has been a National Pensions Reserve Fund investment manager since March 2002, managing a North American equities portfolio. Goldman Sachs Asset Management was appointed under EU public procurement rules.

The NTMA recognised Goldman Sachs International as one of its sixteen Primary Dealers in Irish Government bonds in February 2010. The Primary Dealers each make continuous two-way prices in designated benchmark bonds in specified minimum amounts and within specified maximum bid-offer spreads. They have exclusive access to the NTMA’s bond auctions. These are not contractual arrangements and the NTMA does not pay fees to Primary Dealers.

Anglo Irish Bank, which intends to change its name to Irish Bank Resolution Corporation Limited following its merger with Irish Nationwide Building Society, has retained Goldman Sachs International, since July 2006, as the sole prime broker for its AIAC Long/Short Equity fund. The prime broker provides a range of services that relate to cash or security positions including centralised securities clearing facilities, acting as settlement agent, providing custodial services, financing of margined long or short cash and securities positions and associated reporting services.”