Why is Denis O’Brien not in NAMA?

Imagine one of those post-match interviews when Republic of Ireland manager, Giovanni Trapattoni  is explaining how the defeat could have been a lot worse, imagine a question being put to Trap and the pretty lady translating it and whispering in the Italian’s ear and then an outburst “whatta you mean, paycut, I ainta takin some fubbin paycut” except in my imagination, Giovanni miraculously finds the English to express himself in perfectly modulated received pronunciation and gives us an erudite lecture in contract law.

So Giovanni earns about €1.5m a year, and soccer-mad tycoon Denis O’Brien is believed to pay half of this out of his own pocket. I say “tycoon” Denis O’Brien, but he goes by different monikers – there’s “telecoms mogul” after the apparent success of his Esat and subsequently, Digicel, ventures, there’s “media mogul” as he was described in Britain when his jointly run Irish Daily Star published pap-pics of Kate’s kittens. One moniker you won’t have heard is “property developer” and yet, Denis is associated with a string of property deals in Ireland and elsewhere. For example, Denis reportedly paid €23m for an office block on St Stephen’s Green in Dublin city centre in 2001, with the intention of developing the property and there was a €15m 3-acre former UCD site in Dublin which the Sunday Business Post reported was intended for residential development.

And Denis was one of Anglo’s major borrowers. We know this because the Sunday Independent published an article in April 2012 which reported on Anglo’s biggest borrowers, and subsequently we heard from the chairman of the Independent News and Media group, James Osborne that Denis was unhappy with the article and had, according to then-chairman James, wanted the article pulled from the paper. It should be stressed that the Sindo reported that all of Denis’s loans with Anglo were performing in the sense that not a single interest payment had been missed and that since 2009 when Denis owed a reported €833.8m to Anglo making him the sixth biggest borrower at that bank, Denis had paid down a substantial amount on his loans. Of course Denis might have loans from other NAMA Participating Institutions as well, and who knows, he might have given some business to his former employer, the Bank of Ireland on whose board or “court” he served for a year, as deputy chairman or “deputy governor” between September 2005 and September 2006.

Anglo is one of the five financial institutions from which NAMA acquired loans. There was a €5m threshold on borrowings at Anglo, above which NAMA acquired loans if they were connected to property development. And if you had any development lending, NAMA acquired associated lending as well, whether that lending was to fund the purchase of shares in media companies, or to build loss-making radio businesses or to acquire mobile phone licences in some of the most corrupt countries on this planet according to Transparency International, such as Haiti, Papua New Guinea, Guyana, Honduras, Soloman Islands, Surinam, Tonga, Trinidad and Tobago, Jamaica, Panama, El Salvador, Vanuatu and Samoa.

So why is Denis O’Brien not in NAMA?

We learned in the High Court case brought by Paddy McKillen against NAMA that property lending wasn’t necessarily a criterion for acquiring loans, and in the case of Paddy McKillen, NAMA argued that the value of his loans – over €2bn –  was “systemic” to the Irish banking system even if only €30m or so related to what might properly be called property development (as opposed to property investment).

Denis isn’t the only Anglo borrower to escape NAMA’s clutches. Sean Quinn senior who has €2.9bn of loans from Anglo – €2.4bn of which is disputed by Sean in a case which will come before the courts in 2013 – and as we know Sean did have loans secured on an international portfolio of property. But NAMA left Sean alone, possibly because of concerns over the recoverability of the loans. If I were in the Quinn camp, I might be seeking to find out why NAMA left Sean’s loans at Anglo.

But what possible reason was there for leaving Denis’s loans at Anglo?

If Denis’s loans were acquired by NAMA, then Denis would potentially face restrictions on his lifestyle. NAMA famously imposes a €200,000 cap on salaries to its developers. NAMA doesn’t look kindly on private aviation, so the jet which has taxied President Bill Clinton around the globe might have to go, and NAMA also generally bans charitable donations and sports sponsorship. And you would imagine, paying half the €1.5m salary of the Republic of Ireland manager would be particularly frowned upon by the NAMA martinets.  Of course, if all the loans were fully performing, including maintaining loan to value covenants for property, then the borrower can live their lives as they wish, but after a 67% decline from peak in Ireland, not much commercial property lending is fully performing when applying the LTV covenant.