Mr. Seamus McCarthy:

As members are aware, the National Asset Management Agency was established in December 2009. At the outset, it was envisaged that NAMA would have a life of around ten years, and would therefore be winding up in 2020. However, a Department of Finance review published in July 2019 recommended that NAMA continue to work out its residual loans for a limited period beyond 2021. It further recommended that, before the end of 2021, NAMA would submit to the Minister proposals and a plan for the dissolution of the agency.

Because NAMA’s primary purpose is to dispose of the loans it acquired on the best achievable terms, it is more meaningful to consider its cumulative performance, rather than make year-to-year comparisons.

Members have been provided with a graph that shows how NAMA’s profit level has been tailing off. It had accumulated reserves totalling €4.5 billion by end 2019. At that date, it was projecting delivery of a final surplus of €4 billion when it winds up.

The other key aspect of NAMA’s financial performance is the ongoing reduction in its holdings of loan assets, and associated borrowing. At the outset, NAMA acquired property-related loans with a par value of €74.4 billion for an outlay of €31.8 billion. This was funded through the creation of €31.8 billion in debt. Both the level of loans outstanding, and the outstanding borrowing, had reduced considerably by the end of 2019, as reflected in the agency’s statement of financial position.

I will now turn to the special report on NAMA's management and disposal of the Project Nantes loans. In autumn 2018, concerns were raised with the previous committee and directly with my office about the sale by NAMA in 2012 of a portfolio of loans to a Luxembourg-based company. The disposal, referred to by NAMA under the codename Project Nantes, was one of its first loan portfolio sales. The loans included in the sale were mainly of two types. There was a large number of high-risk equity-backed loans, which had no property collateral, and which NAMA acquired from the participating banks for a nominal payment of €1 per loan. Most of the other loans were property-backed, related to properties predominantly located in other European states or the US, with only about a quarter related to properties in Ireland.

The concerns raised about the Project Nantes loan sale included questions around the adequacy of the sales process, the price achieved for the portfolio, and the legality of aspects of the sale. There was an exchange of correspondence between the committee and NAMA, which we have reproduced in an appendix to the report. Despite the explanations provided by NAMA, I felt that the matter required further inquiry, and my office therefore undertook a value for money examination of the sale.

NAMA’s general strategy to manage its loans was to organise them by reference to debtor connections, that is, grouping of loans connected through a common debtor, or common group of debtors. What became the Project Nantes portfolio was part of the larger Avestus portfolio, which in turn was part of the Quinlan and Quinlan Partnership debtor connection.

In its response to the committee’s inquiries, NAMA emphasised the outturn it had achieved on the Avestus portfolio. NAMA’s total outlay on the Avestus portfolio was €136.3 million. Between 2011 and 2013, it realised a total of €204.1 million from the loans, thus yielding an overall cash surplus of €67.8 million on the portfolio. NAMA has stated that it is strongly of the view that that surplus was the best commercial outcome achievable for the Avestus portfolio at that time.

In fact, the Avestus portfolio of loans was disposed of in eight transactions, rather than in one single portfolio sale, so it is relevant to consider also the outcome on each transaction. As figure 3 in the report summary indicates, two of the transactions, related to large office developments in London, resulted in very substantial gains for NAMA, while five resulted in modest gains. In contrast, Project Nantes resulted in a sizeable loss for NAMA.

Contrary to a code of practice for NAMA’s disposal of bank assets approved by the Minister for Finance in 2010, NAMA did not seek current independent valuations of the Project Nantes loans or of underlying property collateral. Furthermore, NAMA did not pursue a competitive sales process. Instead, it negotiated exclusively with one potential purchaser of the loans called Clairvue, which was introduced to the process by Avestus.