Last week, NAMA announced that it has at last sold its Project Aspen portfolio of €810m par value loans that related to Dublin developer, David Courtney. But what about Project Club, the c€300m portfolio which relates to loans to developer, Eamon Duignan. Sources are this afternoon claiming that NAMA has pulled the sale amid general concerns that borrowers are teaming up with potential buyers which is undermining the reputability of NAMA’s processes.
You will recall that when NAMA sold Donal Mulryan’s €250m of UK loans to Morgan Stanley that Donal then became a consultant to Morgan Stanley after the sale. Out of sight, out of mind it seems and the involvement of Donal never made news in Ireland. But in the case of the recent sale of David Courtney’s Project Aspen, there was considerable comment on David’s involvement with Starwood pre-sales and before the portfolio was offered to the market and that he will act as a consultant for a period post-sales.
In the case of Project Club, NAMA delayed bringing it to market following criticism of its failure to provide a valuation to bidders on Project Aspen – the absence of a valuation, which would be shared with all potential bidders, was seen as unusual and is understood to have had a deterrent effect on bidding generally. However, NAMA duly went about getting a valuation of Project Club after the criticism with the previous portfolio. Now it seems that NAMA has become sensitive about borrowers teaming up with potential bidders for single-borrower portfolios, and there has been some unsubstantiated talk of Eamon Duignan having an involvement with a potential buyer, Patron Capital Partners.
NAMA and Patron were both asked for comment, but there hasn’t been a response at time of writing.
A fortnight ago, the Sinn Fein finance spokesperson Pearse Doherty challenged Minister for Finance Michael Noonan about borrower involvement in single borrower portfolio sales. It seems NAMA has taken the concern on board. If the story is confirmed, it would seem that it won’t stop NAMA selling loan portfolios, it will just mean that loans from different borrowers will in future be packaged for sale so as to prevent any particular borrower conferring benefit on a potential bidder.
This is the parliamentary question and response:
Deputy Pearse Doherty: To ask the Minister for Finance following news that the National Asset Management Agency is selling large portfolios of loans which bundle together loans to a single borrower, if he is concerned that the borrower may derive a benefit from providing pre-sale advice to certain bidders. [18471/13]
Minister for Finance, Michael Noonan: I am advised by NAMA that it cannot preclude market participants from approaching debtors to discuss their property assets or to indicate potential interest in acquiring either properties or loans. Nor can NAMA preclude debtors from engaging with such potential purchasers. To do either would be counterproductive and could stifle normal commercial discussions in the property market and in particular could discourage international investors from exploring acquisition possibilities in Ireland. However, NAMA has very clear rules regarding the open marketing of loans or of properties on which it holds security.
As set out in response to recent Parliamentary Questions on the topic of NAMA loan sales [44286/12, 44287/12, 44288/12, 44189/12, 1549/13, 8753/13, 8754/13], NAMA has adopted a very thorough approach in line with accepted international market best practice for the sale of loan portfolios. As part of the formal sales process, potential purchasers are required to provide an undertaking that they will not engage with the debtor or other obligors at any stage during the sales process. Both debtors and potential purchasers are aware that the infringement of agreed protocols or undertakings may have an impact on NAMA’s decisions as to whether and to whom it sells a particularly portfolio. Furthermore, where NAMA approves the sale of any loan or approves the sale of any secured property by a debtor, it requires a confirmation that the purchaser is not connected to the debtor or other obligors.
Having ensured, as far as possible, that the sales process is conducted on the basis of all parties having equal access to the necessary information at the same time and that such primary sales are not made to the relevant debtors or to connected parties, NAMA advises that it has no legal right to intervene in any further future management or sales of the loan or underlying property in question post disposal.
NAMA Wine Lake 
If these loan sales are to happen, the ‘long knowledge’ of the borrower will be required by the purchaser, at least for a time. These Equity funds will not have the skill set to develop further, will not have the relationship with existing tenants and will not have a platform to asset manage from. Generally they are based out of London and so will need representation here. If NAMA are to deny a relationship between the purchaser and the ‘Fund’ then the funds will lower the price to compensate. It may not be the ideal situation but if values are to be maximised then it is necessary.
Bob has it in one.
I don’t think that it matters a fiddler’s to the borrower whether he is involved in his old assets going forward or not. His priority is to get out of NAMA and have a more commercial entity holding his loans. There is more opportunity in the new sales that will fall from IBRC, BoS and NAMA itself, than in taking the gig to manage the loans that NAMA is selling.
It’s the buyers that want continuing management, not the borrowers.
@Bob now thats a scary thought,to shift Project Ass,that garbage portfolio it took effectively 80% financing/equity combo by NAMA.
Face was over 800mio pp was in around 200mio-so following your theory they would have paid less w/o Courtney….
Another way to look at it may be to ask yourself have any these f**kers got banking licenses….are they regulated in RofI to buy and own loans..is the central bank/regulator ok with ‘starwood’ owning and servicing 800 MILLION of irish loans……what it if all goes horribly wrong-but there will be no complaints from the borrowers as they bent over.
All they are doing is trowing a bone to get the original borrower on side….do irish loans not have covenants about selling/transferring them to SPV’s, or is NAMA making a few back room deals-regarding say releasing PG’s for keeping schtum..
they are not collecting/holding deposits – therefore they do not require a Banking licence.
@JM I’m not privy to the original loan doc’s but its possible to negotiate at origination that in the event of resale/transfer of loan the new owner must have banking lic. And be …try Mckillen V Maybourne Finance/NAMA.
“Market standard loan agreements often contain transfer provisions requiring the lender to consult with the borrower prior to transferring or assigning the loan to a third party. In addition, there is often a permitted transferee provision limiting the type of entity that can take on the loan. This is reflected in the wording of the Loan Market Association (“LMA”) standard form leveraged loan documentation.”
http://ehoganlovells.com/cv/704e3efd09dd1205bbf655784a0c75ab6f16988e/p=5073553
@JG, I believe that the Wall Street Warriors have defined NAMA’s 20% slice of the Aspen portfolio as “schmuck money”. In other words it is a useless, worthless gesture, never to be collected. It wasn’t there for Courtney and it’s not there for NAMA.
Now to those pundits for whom the term “schmuck” causes some head scratching and needs further detailed clarification, I will define.
A schmuck is one of those descriptive terms people come up with to express to others what they think about someone else. It is actually a pejorative: a word having an unpleasant or disparaging connotation.
A schmuck is someone who is a stupid or contemptible person; an oaf. It’s a judgement, of sorts, of the schmuck’s capabilities and value (note: I said value, not values – big difference) It can be spelled schmuck, or shmuck.
The word is Yiddish, it started being used about 1890 – 95. The actual Yiddish word was considered vulgar and meant literally, penis (of uncertain origin.) The use of which I guess eventually expanded, or perhaps that should be contracted, to the portion of one’s penis which is cut off during circumcision. It then evolved to include the metaphorical meanings: a prick, an asshole, an ignorant gullible dumbass, a sucker, etc.
According to the guy from the PE fund that bought me a beer in the Stone Street Tavern, that’s what they think of NAMA’s 20% in the world of Wall Street.
http://www.stonestreettavernnyc.com/
@WSTT the staff canteen is Balthazar,if you still in town,the austerity budget may stretch to a pint or two:)
We can try ‘ply’ a few Starwood chaps with cheap gargle and get some skinny,but last time I had a few with them, they were located/headquartered closer Sean D and Gail K.
http://www.balthazarny.com/
Anyone and everyone will be at thsi,later this month worth a trip,they have a finance/pe/fund area..or try the bar at The Cosmo-The Cosmpolitan in Las Vegas,or any the better strip,sorry golf clubs…..
NAMA should sent a few people over…..
http://reconlasvegas.icsc.org/2013RECON/
@JG. Pity, John. Left this morning. Headed for Boston. Checking out rumors of a US class action against RBS / Ulster for fraudulently mis-selling swaps. Now that’s interesting! Big damages can be achieved in the American courts in front of a bunch of sandal wearing Massachusetts jurors who hate banks
Sorry I should have said “the borrower and the fund” not “the purchaser”.
@ JG Starwood would have walked from Project Aspen had Courtney not remained to manage, at least for a short time. There is a price for “orderly continuity” and there is a lesser price for chaos. You must remember these funds are just money men. Chances are they are American and managing some fund in the UK for a few years, after which they’ll go back to the states and presumably step higher up the ladder as their reward. They are transient, impationate and understand cash flows and spreadsheets. They need asset management skills. They need the borrower.
As far as back room deals are concerned, these Equity funds don’t think like that. They don’t care. If the sum works then they’ll do the deal. If not, they’ll do one in Spain or wherever. Is NAMA doing back room deals ? Probably and all over the place.
@Bob quite familiar with Starwood…
NAMA is the weirdest strangest most bizarre,publicly owned entity in the universe,it’s like the clergy,or worse.
They made a b*lls off project ass…..shower of clowns,a disgrace to the irish taxpayer.
If I’m wrong NAMA release the fecking docs then,have a few old hands review and comment….shhhh it’s commercially sensitive again.
What other publicly owned organisation,can throw over a hundred million out the door w/o any security or oversight?
Oh here starwood you guys a bit shy with the equity….no oversight at all,Frank from revenue,Brenda a civil servant lifer makes these decisions,its a joke.
Here NAMA grow up starting acting in the interest off the irish taxpayer release the loan docs and SPV details the FDIC does !!!!!
http://www.fdic.gov/buying/historical/structured/documents.html#INDYMAC%20VENTURE%20LLC
http://www.fdic.gov/news/news/press/2009/pr09183.html
@WSTT safe travels and all the best,i know southie reasonably well,im sure they have finally lifted the ban on me at Shenannigan’s:)
http://timeoutboston.com/restaurants-bars/bars/61049/bostons-best-irish-bars
Talking of Ulster Bank, I see that their dustbin West Register (RoI) Property Ltd (where they sub-sell all the foreclosed UB loans to themselves) has run into problems with the conservationists. Who ever said banks were sensitive to the communities in which they operate.
http://www.irishtimes.com/life-and-style/homes-and-property/new-to-market/ballsbridge-demolition-debate-set-to-run-1.1386131
BTW, don’t you just love it when the Brits put RoI or Eire in the company’s name. ….. never learn. It rankles. Maybe I’m just more sensitive than the Ulster Bank is.
@WSTT never liked that building much….now this is really,really scary,look at Ireland’s number,wow.
Apols,NWL beyond off topic…sorry.
http://www.theatlantic.com/business/archive/2013/05/the-global-youth-jobless-crisis-a-tragic-mess-that-is-not-getting-any-better/275696/
Here is the full report…..
Click to access wcms_202326.pdf
[…] to protect against Patron Capital Partners “having an involvement” with Eamon Duignan, as cited by NAMA Wine Lake yesterday, indicating that this was “unsubstantiated […]
It is not often that CoStar’s Finance Editor, James Wallace writes a confusing piece. But here he is like the proverbial “on the one hand this, and on the other hand that” useless barrister’s opinion.
He contradicts himself. On the one hand, he claims that NPL bidders factor in a discount which accounts for the level of uncertainty and lack of information – thereby reducing the price that NAMA might achieve; yet on the other hand he states that buyers in bed with the borrowers should be able to get rid of any such uncertainty – presumably allowing them to make a higher bid. Which is it?
To me, it shows a lack of preparation by NAMA and its selected sales agent if full and best information is not available to all bidders. It’s not the fact that someone independently did their homework and gained “first mover advantage”.
@WSTT, the Sunday Business Post yesterday reported that CBRE would begin bringing the Project Club portfolio to market in “the next two weeks” but neither CBRE nor NAMA have responded to requests for comment on here in the context of the story of the entire project being pulled.
If single borrower portfolio after portfolio goes to the buyer that teamed up with the borrower pre-sale (“pre-sale” is before the portfolio is offered to the market and NAMA confirms there is no issue in discussions between borrower and bidder pre-sale), then what potential bidder is going to waste time going after such portfolios in future? Offering mixed borrower portfolios still allows the borrowers to team up with bidders pre-sales but unless they all team up with the same buyer, then you will have a broader based actual market and greater competition.
NAMA will also avoid the perception that borrowers are buying back their portfolios at a discount – I know, I know, that’s not what is happening but if the borrower acts as a consultant or is rewarded by the buyer, the perception comees to the same thing.
NAMA may have paused for thought after the Project Aspen portfolio went to the bidder supported by David Courtney, pre-sale, but now it faces Sean Reilly’s portfolio perhaps being marketed and ending up with Sean and Anchorage. And in Eamon Duignan’s case, the talk has been of Eamon being in discussions with Patron pre-sale.
@NWL, I don’t think that the borrowers care who buys the portfolio, in general they just want out of NAMA and have someone more commercial sitting on the other side of the table holding their loans. How many do you bundle together? NAMA are getting bids in that are in the hundreds of millions. The prospective buyers will all want to talk to the borrowers and even if you bundle two or three portfolios, buyers and borrowers will talk together and cut deals. It’s just NAMA that’s hidebound by bureaucracy and fear that a borrower might actually survive them and make a profit in the future.
P.S. It has been discussed on here several times whether or not the exclusion of borrowers from the bidding process will cost the taxpayer money. If you take the CoStar article at face value, it would seem to confirm the contention that it does – the question is, “By how much?”
@WSTT
Any way you could back the statement
“@NWL, I don’t think that the borrowers care who buys the portfolio, in general they just want out of NAMA and have someone more commercial sitting on the other side of the table holding their loans.”
Whos to say any of those funds are any better to deal with than NAMA
@Patrick, There is no way you would ask that question if you were dealing with NAMA. It’s like dealing with the Revenue or the dark recesses of the civil service at its most frustrating. The PE companies that buy these loans are interested in making a profit. They have no interest in retribution, vengeance or acting like a beggar on horseback. There is too much mistrust and hate filled emotion between NAMA and it’s borrowers to sustain a healthy relationship that is beneficial to the economy.
@Patrick, I have a bit more time to answer your question with examples.
NAMA’s relationship with its debtors is currently focused on getting them into a “stable position”. By this the Agency means it puts its arms around all the rental income and only allows out enough money from the rents to ensure that the office can remain open with the minimum staff necessary to manage the assets.
NAMA’s dealings consist of telling the borrowers that it wants “the following by next Friday … or else!” The “or else” is generally the withholding of funding for agreed payrolls, the threat of receivership and the threat of personal summary judgements against the borrowers.
That’s why any fund is better to deal with than this bunch of moronic schoolyard bullies.
@wstt
Thankfully we have no dealings with them although would have associates that do.
I can take it from your answer above that you where or still are dealing with the agency yourself.good luck with that.