The National Asset Management Agency (Nama) will deliver a surplus of less than €500m on the bad loans it bought from the country’s banks by the time it concludes its business, if market conditions remain unchanged.
The level of potential profit outlined by Nama chief executive, Brendan McDonagh at a hearing of the Oireachtas finance committee is less than half of that previously reported in May. At the time Mr McDonagh declined to comment on the reported €1bn figure.
Mr McDonagh also announced that the agency is to redeem a further €600m of its senior debt, bringing total senior debt redemptions to €7.6bn so far in 2014.
Nama has now redeemed €15.1bn in senior debt since its inception— 50% of the €30.2bn issued by Nama to acquire loans from participating institutions.
“This is a notable milestone for Nama and one that has been achieved far earlier than anyone would have anticipated when the agency began its work. It shows the significant progress Nama has made in maximising the amount recovered for the taxpayer and eliminating a €30.2bn contingent liability of the State,” Mr McDonagh said.
Nama’s chief executive also said that the 50% target had been reached two months ahead of the original 2016 date and added that the agency now plans to redeem 80% of its senior debt by 2016.
“Achieving this 80% target will require a substantial volume of Nama loan and asset disposals in Ireland as well as Britain and elsewhere; for the most part, sales will involve commercial assets or loans secured by commercial assets,” added Mr McDonagh.
In relation to the surplus it is expected Nama will deliver to the taxpayer, the chief executive said the estimate was based on market conditions as of the end of June.
The estimate, he warned, is a conservative one arrived at as the result of a “straightforward calculation”.
“Yesterday our June 30 accounts were published and we did an assessment at that stage... we’ve always taken a prudent view of this; if the conditions maintained as they were then we would probably see a somewhat less than €500m surplus at this stage,” said Mr McDonagh.
In response to added questions from Sinn Féin finance spokesperson, Pearse Doherty, Mr McDonagh said that neither he nor any other member of the Nama board would speculate on how the surplus could change based on potential market changes.
“The board would not countenance the view that I or my executive team would engage in speculation that prices will go up 5% or 10% from where they are. If that happens, obviously the surplus line will increase on the remaining assets,” he said.
Nama also announced yesterday that it is redeeming the last tranche of €134m of senior bonds that were issued to the Central Bank to acquire a floating charge over IBRC assets in February 2013 after the liquidation of the Irish Bank Resolution Company.
At the hearing, Mr McDonagh revealed that of the major loan and property portfolios brought to market by the agency in the last 18 months, 88.5% have been acquired by US buyers — the majority of which are large private equity funds.
Just under 7% of those loans and assets were sold to domestic buyers, while 3.5% and 1.2% respectively were acquired by German and UK buyers.
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