NAMA could acquire €30bn in foreign loans

By Paul O’Brien Political Correspondent

Friday, August 21, 2009

THE State may end up taking over almost €30 billion of high-risk British and US property loans in its bid to restore Irish banks to health.

Once established, the National Assets Management Agency (NAMA) will buy roughly €90bn of property loans from the banks. The objective is to remove the riskiest loans from the banks’ balance sheets in order to return them to health.

But some €28bn of the €90bn loans which the state agency looks set to acquire relate to property developments in Britain and the US embarked on by Irish developers.

The Government had made clear from day one that foreign developments would be included in NAMA and indicated that they could ultimately account for up to a third of the loans taken over.

Those figures now look set to be realised, after tender documents released by the Government this week put estimates on the loans involved. They show the combined value of British and US loans at circa €28bn – €25bn in the former and €3bn in the latter.

The documents state: "It is estimated that the Great Britain portfolio of loans which may be eligible for acquisition by NAMA is approximately €25bn." While they add that "no further detail on the composition of this portfolio will be made available at this time", the Government has previously said roughly half of the British loan portfolio relates to developments in Northern Ireland.

In relation to the US, the documents state: "It is estimated that the USA portfolio of loans which may be eligible for acquisition by NAMA is approximately €3bn."

The figures indicate the scale to which Irish developers poured money into British and US investments during the height of the boom. The tender documents were issued as part of the process to recruit real estate valuers in Ireland, Europe and the US for the properties that NAMA will acquire.

The valuers’ job will be to estimate the current market value of the properties.

However, the market value is unlikely to be the price that NAMA pays to accrue the assets. Instead, the agency is set to pay a price which is in line with "the long-term economic value" of the properties. This is in accordance with EU guidance, but has raised fears that the taxpayer will end up paying above the odds for the loans.

The legislation to establish NAMA will go before the Dáil when it resumes after summer recess next month.

This story appeared in the printed version of the Irish Examiner Friday, August 21, 2009