€5.7bn Project Eagle loans sale under scrutiny
Newspaper journalists in Belfast and BBC Northern Ireland Spotlight had been investigating since the start of the year payments to local figures for their work on the sale last year of a huge bundle of northern loans worth €5.7bn held by Nama.
Following an auction, they were sold last year to Cerberus, a US fund, for €1.6bn. However, the Nama sales process is now under intense scrutiny. The unexpected departure of Ian Coulter, the managing partner of Tughans, in an apparent dispute over fees in January, added fuel to the speculation.
The BBC has reported that £7m (€9.8m) in an Isle of Man bank account was intended to facilitate payments to non-lawyers or ‘deal fixers’. The money was in an account controlled by Mr Coulter. Tughans named Mr Coulter as the sole beneficiary of the account. It said it had reported the matter to the Northern Ireland Law Society and that the money had been retrieved.
Speaking under Dáil privilege last week, Mr Wallace said the money was “reportedly earmarked” for an unnamed politician. All the North’s leading politicians have since said they received no monies nor were they the intended recipients of any behind-the-back payments.
The Dáil’s Public Accounts Committee and a Stormont committee are to investigate. However, the Irish Examiner has highlighted other aspects, such as: Two firms participating in the sale process, Cerberus Capital and Pimco, used the same lawyers, US firm Brown Rudnick, during the sales process.
Nine bidders expressed an interest and Cerberus Capital — the huge US equity fund — which had previously had bought a large chunk of discounted property loans from Ulster Bank emerged as the highest price bidder in an auction in April last year.
A few weeks before, a potential rival bidder Pimco had withdrawn from the process after it said it told Nama it had “concerns” about an acquisition fee that third parties had demanded from it. A spokesman for Nama again reiterated yesterday that Nama stood behind the sale process. Until yesterday, no one had heard from Brown Rudnick.
However, in a statement to the Irish Examiner, Brown Rudnick confirmed it assisted another bidder which had withdrawn in its preparations for a possible Project Eagle bid.
“Brown Rudnick was then engaged by Cerberus in connection with its bid. We in turn, engaged Tughans to assist us as local counsel in this transaction. For their work ... we agreed in a formal mandate letter to share with Tughans our fee from Cerberus and this arrangement was disclosed to both Cerberus and Nama,” a Brown Rudnick spokesman said.
“We did not engage, or enter into any agreement with, any other party in connection with the transaction or in connection with the fee, nor did we share our fee or make any payment to any other party. Payment of the fee to Tughans was made directly to a Tughan’s bank account pursuant to an invoice from Tughans for professional fees in relation to the transaction.
“This firm received representations from Tughans covering compliance with laws and regulations including the Foreign Corrupt Practices Act and the UK Bribery Act and, on the back of those representations, made equivalent representations to Cerberus.
“In addition, both this firm and Tughans represented directly to Cerberus, and Cerberus represented to Nama, that no fee, commission or other remuneration or payment was payable to any current or former board member of Nama, any current or former member of the executive of Nama or any current or former member of an advisory committee of Nama in connection with the transaction.”
is a US law firm which advised both Cerberus and, in the early stages, Pimco.
is the US fund that won the Project Eagle sale in April 2014. Nama completed the sale of €5.7bn in loans for a discounted €1.6bn to Cerberus in June 2014.
, a US fund, withdrew from the bidding process in March 2014.
, once led by managing partner Ian Coulter, is one of the North’s leading solicitors.
was a committee of Nama.
Nama says its Asset Recovery Division receives an unsolicited approach from Brown Rudnick, indicating that Pimco wants to buy the loans held by Nama of borrowers in the North.
Nama launches auction to sell a huge bundle of loans worth €5.7bn, under the codename Project Eagle, held by Northern-based borrowers secured on properties in Belfast, the Republic, and in Britain.
Nama appoints Lazards as adviser to run the Project Eagle sale. It invites a roster of nine bidders — including Pimco and Cerberus — to participate.
It is understood Lazards has whittled the roster of nine down to a list of three potential interested bidders: Pimco, Cerberus, and an unknown third bidder.
According to Nama, Pimco tells the agency that Pimco’s “proposed fee arrangement with Brown Rudnick includes also the payment of fees to Tughans and to a former external member of the Northern Ireland Advisory Committee (NIAC)”.
Nama says its board meets and decides that the planned fee arrangement warrants withdrawal of Pimco from the bidding process.
Nama says it told Pimco of its “serious concerns” about the fee arrangement proposals and “in particular, the proposed fee payment to the former member of the NIAC”.
Nama says Pimco withdraws from the Project Eagle bidding.
In a statement to the Irish Examiner yesterday, Pimco said:
Pimco was one of a number of firms approached by third parties to gauge potential interest in purchasing the Project Eagle portfolio, but that none of the third parties were appointed as advisers to Pimco.
Having followed its usual due diligence processes, Pimco identified concerns about the role of the third parties and so did not agree to any agreement with, or proceed with any transaction involving, the third parties.
Prior to withdrawing from the Project Eagle tender process, Pimco had raised its concerns about the role of the third parties to Nama. It said it had advised Nama of the details of an acquisition fee that had been requested by those third parties and the identity of those third parties. It said Nama advised Pimco that it too shared serious concerns about the matters raised. Pimco said it informed Nama of Pimco’s decision not to proceed in the Project Eagle tender process.
It decided to withdraw from the Project Eagle tender process not because of any Nama decision, but because of the concerns relating to the third parties that Pimco had identified as part of its due diligence checks. It said that at no point was Pimco required or asked to withdraw by Nama, and no such decision was communicated by Nama to Pimco or relevant to Pimco’s decision.
Cerberus wins Project Eagle. The official figures emerge much later: Cerberus had paid a discounted price of €1.6bn for the loans, which are worth €5.7bn at face value.
The North’s first minister, Peter Robinson, welcomes the sale as “excellent news for the Northern Ireland economy” as valuable assets could now be developed. He thanks Nama and Finance Minister Michael Noonan “for the constructive way they have worked with the Northern Ireland executive over the sale of this portfolio”.
Industry property website CoStar Finance reports: “While the deal prevents [Nama] from benefiting from any of the upside created through Cerberus’ varied business plans across Project Eagle, Nama has unlocked the stagnant Northern Ireland real estate market in a single trade which will trigger subsequent future transactional activity in the months and years ahead.
“Nama’s decision to instigate the formal loan sale process was reinforced at the time by a deepening political imperative for Ireland’s bad bank to capitalise on the weight of international capital chasing loan portfolios and de-leverage faster.”
Ian Coulter unexpectedly resigns as managing partner of Tughans in Belfast. Speaking to The Irish News, he says he is unable to talk about the reasons for his departure “at this stage”.
Independent TD Mick Wallace, speaking in the Dáil, details serious allegations about the sale.
Police Service of Northern Ireland says it has had no report and is not investigating any issue.
Nama details the Project Eagle sales process in 2014:
Nama told one of the bidders it would have to withdraw because of a fee arrangement to parties that included a former member of the agency’s NIAC. The former member was not a member at the time of the sale and never had access to confidential information. The Nama board determined that this arrangement could undermine the integrity of the sale.
Nama says the NIAC had no role in the sale process. It says it should be noted that external members of the NIAC had no access to confidential information on the Project Eagle sale process or confidential information on debtors or assets in the Northern Ireland portfolio. Debtor information was never discussed at the NIAC — this was made clear to all members of the NIAC from inception.
Nama states that all nine bidders for Project Eagle had access to the same information. Claims to the contrary are without foundation, it says.
The loan sale broker went on to engage with all other interested parties and Cerberus paid the highest price.
Cerberus gave Nama written confirmation and has confirmed again that no fees were paid to any party that ever had a relationship with Nama.
Nama says that Tughans’ issue is internal to it and has no relevance to Nama’s open competitive sales process; it says attempts to conflate Nama’s process with an internal Tughans’ issue are entirely wrong.
Nama states that no fee payment was made by Nama to any of the parties involved.
The agency says that, prior to confirming Cerberus as its preferred bidder, Nama sought and received confirmation from Cerberus that no fee was payable by Cerberus to any person connected with Nama in relation to any aspect of the Project Eagle sales process.
Nama states again that it is fully satisfied, having taken advice from Lazard, that the process delivered the best possible return that could have been achieved for Irish taxpayers.
In a lengthy statement to the Irish Examiner and other media, Cerberus says it is deeply concerned by the allegations made by Mick Wallace in the Dáil.
“Specifically, we engaged Brown Rudnick as our lawyers to supplement our primary legal team from Linklaters and assist us in our bid for Project Eagle. We have had a long-standing relationship with Brown Rudnick in the US. They informed us that they had been previously working with another interested party that was no longer involved in the process. We were not aware, and we were not made aware, of the reasons why their former client was no longer involved. Given the timing, and the complexity of the bid and the underlying assets, we believed that we could benefit from Brown Rudnick’s prior work.”
The Cerberus statement continues: “Brown Rudnick informed us that they wanted to retain Tughans as a Northern Ireland-based legal firm to supplement its work. In our engagement letter with Brown Rudnick, we received certifications, representations and warranties covering a number of issues including compliance with all laws and regulations including the US Foreign Corrupt Practices Act and the UK Bribery Act. We insisted Brown Rudnick require Tughans be bound by the same standards and Brown Rudnick received the same from Tughans.
“Nama requested that we confirm to it that no fee, commission or other remuneration or payment was payable to any current or former board member of Nama, any current or former executive of Nama, or any current or former member of an advisory committee of Nama in connection with any aspect of our participation in the tender process. After receiving confirmation from Brown Rudnick, and a similar confirmation by Tughans to Brown Rudnick, we provided such confirmation to Nama. Consequently, to our best knowledge, no improper or illegal fees were paid by us or on our behalf by our advisors.
“As to the awarding of Project Eagle, we understand from Nama’s public statements that we were the highest bidder in a structured process overseen by Lazard, an internationally respected investment bank. We conducted ourselves in accordance with the highest ethical standards in the bidding process and we have done the same in connection with our ownership and management of the Project Eagle portfolio.
“We have no knowledge or reason to believe that process was conducted with anything but the utmost integrity.”
Brown Rudnick confirms in a statement to the Irish Examiner that it was involved with a previous bidder in the sales process.
The law firm said: “Brown Rudnick was then engaged by Cerberus in connection with its bid. We in turn, engaged Tughans to assist us as local counsel in this transaction. For their work with respect to this engagement, we agreed in a formal mandate letter to share with Tughans our fee from Cerberus and this arrangement was disclosed to both Cerberus and Nama.”
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