To those of you who closely follow the NAMA saga, you will know that one of the principal advantages claimed by NAMA and its supporters for the Agency’s existence was that it could manage the loans of an individual developer across all the NAMA participating banks – AIB, Anglo, Bank of Ireland, EBS and INBS. In that way, developers couldn’t play one bank off against another, and NAMA would have an overview of ALL the developer’s dealings at the principal Irish banks. Sound familiar?
So it came as a bit of a surprise that NAMA decided to acquire some loans associated with investor/developer Paddy McKillen, but not others. For instance, we know that NAMA acquired approximately €800m of loans associated with the Maybourne group of three 5-star London hotels and we know from Paddy’s extensive litigation in the UK that he owns 36% of that hotel group. But we also learned during the same court hearings that Paddy owes Anglo, or IBRC as it is now known nearly €300m. And we even saw a good example of why it made sense for one agency, like NAMA, to be across all the loans of a specific developer when, according to the Irish Times “Mr McKillen told the court last week that he may not have told IBRC that he made €50 million from property sales last year at a time when IBRC asked for details of assets he could sell to raise cash for security on its debts.”
But in July 2011, NAMA announced that it was not going to acquire all of Paddy’s loans.
Why not? NAMA’s press release at the time merely said* “the land and development exposure declined significantly since December 2009 and the loans were no longer deemed material in the way they had been in December 09”
Hmm, so NAMA held onto the €800m of Maybourne loans but rejected a further €1.4bn including presumably the Anglo loans which currently amount to €300m.
Ireland’s Sunday Independent reported the weekend before last that Paddy had made representations to An Taoiseach Enda Kenny and others in Government in May 2011, . Did those representations to Government by Paddy in May 2011 result in some arm-twisting of NAMA and the subsequent announcement just over a month later that NAMA wasn’t to acquire Paddy’s loans?
Yesterday in the Dail, the Sinn Fein finance spokesperson Pearse Doherty asked Minister for Finance Michael Noonan that question, and in response Minister Noonan confirmed that Paddy’s representations had been passed on to NAMA. Were the representations or the fact that the came via the government of the day, material to NAMA’s decision-making? The Minister doesn’t say. The full exchange is here
“Deputy Pearse Doherty: To ask the Minister for Finance further to reporting in a Sunday newspaper of documents disclosed under the Freedom of Information legislation, if he will confirm if he or his Department passed on to the National Assets Management Agency, the representations reportedly made in May 2011 to the Government by Mr. Paddy McKillen; if he will confirm if these representations were available to NAMA; and if so, if they were material to the decision announced by NAMA in July 2011 to refrain from acquiring further loans connected to Mr. Paddy McKillen..
Minister for Finance, Michael Noonan: I can remind the Deputy that under the NAMA Act it is a matter for the Board of NAMA, taking account of legal advice available to it, to determine whether certain loans be acquired or not and the procedures to adopted if it does decide to acquire.
In the case identified by the Deputy, I am advised by NAMA that Mr McKillen’s views on the acquisition of his loans were well known to its Board in July 2011 when it decided not to acquire his loans and the loans of companies associated with him. In reaching its decision not to acquire the loans, the Board had regard to section 84 of the NAMA Act 2009.
The Board was aware of the content of materials produced by Mr McKillen and either published, placed before the Courts in his legal actions or submitted by him directly to NAMA or to other parties, including my office, and which were then forwarded to NAMA.”
NAMA has never explained why it departed from what was advanced as one of its principal advantages when it was conceived and why it allowed some of Paddy’s loans to remain with the original NAMA banks, particularly Anglo. We do know that Paddy has what seems like a good relationship with Anglo, evidenced by the friendly text exchanges between Paddy and the IBRC CEO Mike Aynsley which were referred to in the recent London High Court hearings.
Perhaps NAMA and Minister Noonan might appreciate why the perception would be that their treatment of the Paddy McKillen loans stinks. Did political intervention interfere with NAMA’s activities and lead to an action which subverted one of NAMA’s original purposes? The timing and the vagueness of the Minister’s responses above won’t help dispel that stench..
* The NAMA press release from July 2011 no longer appears to be available but it said “It is confirmed that the Board of the National Asset Management Agency (NAMA) has decided not to acquire approximately €1.4 billion in loans relating to Mr. Paddy McKillen and which were the subject of an appeal by Mr. McKillen to the Irish Supreme Court. In line with the recent Supreme Court judgement on this matter the decision not to acquire the remaining loans was taken by the Board on the basis of the current rather than the historical composition of the relevant loan portfolio. The decision of the Board not to acquire reflects the fact that the composition of the loans under consideration changed substantially. The land and development exposure declined significantly since December 2009 and the loans were no longer deemed material in the way they had been in December 09. It is important to bear in mind that NAMA successfully defended two of the four grounds on which Mr. McKillen objected to the agency’s original decision to acquire his loans; namely that the NAMA Act was unconstitutional and that it breached State Aid rules. The fact that the Supreme Court found in favour of NAMA on these critical issues was hugely significant for NAMA. The Agency is now making significant progress on managing the €72.3 billion of loans it has acquired from the five participating banks and maximising the return for the taxpayer. That remains our overriding objective”