The launch of the sales process for the €3-4 bn Project Gem loan portfolio comes as Ireland's National Asset Management Agency (NAMA) battles a storm of criticism about how this 'bad bank' operates.
It's probably only natural that many of Ireland's prolific, debt-fuelled developers complained loudly at losing control of their empires when NAMA was rushed into being in late 2009.
The agency's remit was to relieve the collapsing Irish banking system of property loans with a book value of €77 bn at the height of the Global Financial Crisis, and to recoup as much capital as possible by actively managing and selling distressed assets and loans.
Working for NAMA
This meant that in many cases the original owners of assets continued to manage them on NAMA's behalf. It's no surprise therefore that large sections of the Irish public saw NAMA as a case of the government bailing out 'fat cat' property people and bankers, while the ordinary man and woman on the street faced the full force of budgetary austerity. It has been argued with some force, however, that there was no other solution to the problems facing the banking sector. The government was between a rock and a hard place.
Now more fundamental problems are coming to the fore. Big complex transactions involving vast sums of money are inevitably prone to suggestions of dodgy dealings. The crux of the problem is the inherit conflict between the public's right to know and the need for confidentiality with regard to major property-related transactions engineered by NAMA from its headquarters in the Treasury Building in Dublin.
Project Eagle
NAMA's biggest coup to date, the sale of the Project Eagle portfolio of Northern Ireland property loans to US private equity firm Cerberus for £1.3 bn (then about €1.6 bn) in April 2014, is currently at the centre of a political fire storm. The portfolio comprised €4 bn of Irish bank loans backed by 900 properties in Northern Ireland which, it should be pointed out, is part of the UK and not the Republic of Ireland.
Earlier this month top NAMA officials appeared before a parliamentary committee in Dublin to explain why they reject the findings of a highly critical report from the Comptroller and Auditor General which suggests the discounted price for Project Eagle resulted in a loss of €220 mln to the Irish taxpayer. NAMA claims it pitched the valuation following professional advice.
A gigantic sales process of this nature inevitably involves a legion of advisers working behind the scenes. In this case it has emerged that a partner at a Northern Irish law firm apparently had £7.5 mln resting in a bank account on the Isle of Man which allegedly was part of the fee for work on Project Eagle subcontracted by a US law firm representing private equity bidders. The Northern Irish lawyer in question claims there were good reasons for the money to be placed in the account temporarily before it was moved back. He says he outlined these reasons to his partners before he left the firm.
Unproven allegations take flight
An independent member of the Dublin parliament has cast doubt on this reading, alleging that the money was earmarked as an under-handed payoff for one or more senior politicians in the Northern Ireland parliament based in Belfast.
Separately, the UK's National Crime Agency confirmed in October that six people are being investigated in relation to allegations of fraud, bribery and corruption arising from Project Eagle.
It is unclear how long this criminal investigation and related political probes will last, or how much the unproven allegations pertain to individuals rather than NAMA as an organisation. But if Ireland's tortured history of contentious inquiries is anything to go by, it could take years before there are any answers. By that time, deservedly or not, NAMA could become permanently associated with the tag of a 'bad bank', despite all its hard work in bailing out the Irish banking system and refloating the country's real estate sector.
Cormac Mac Ruairi
Deals Editor
