Nama could be wound up before the 2016 general election, according to people familiar with the situation.
The Department of Finance is currently conducting a major review of the agency which is expected to be released before the Dáil goes on summer recess. According to a weekend report in the Sunday Business Post, the investment bank, UBS, has carried out a review of Nama’s assets.
The aim would be to wind up Nama before the next general election, which could then be cited as another milestone on the road to recovery, said one person familiar with the situation.
The Government successfully restructured the €27bn in promissory notes in February 2013. As part of that restructuring, IBRC was put into liquidation. At the time, Minister for Finance Michael Noonan announced that all IBRC assets would be put up for sale and any remaining assets would be transferred to Nama.
As recently as April, the minister was guiding that €5bn-€6bn of IBRC’s €22bn portfolio would likely end up in Nama. However, because of buoyant market conditions, the vast bulk of the IBRC portfolio has already been sold to private investors and it is expected that the remaining assets will be divested before the end of this year.
The Government will also look to part privatise AIB before the election. The faster winding down of Nama is seen as key to this strategy. AIB was holding €15bn of senior AIB bonds at the end of last year. These bonds are a major drag on profitability. Consequently, the faster that Nama redeems these bonds, the quicker AIB’s operating performance will improve.
If Nama redeems its subordinated bonds, then this will augment further AIB’s capital position and make it more attractive to private investors.
When Nama was set up in 2009, critics argued the Government was creating a contingent liability that would have huge implications for the national coffers. The agency issued €30bn in senior bonds and €1.8bn of subordinated bonds for roughly €72bn of loans sitting on the balance sheets of the domestic banks.
Nama was originally supposed to wind down these assets before 2020. But its performance so far has exceeded expectations. Nama has redeemed €13bn of senior bonds and this is scheduled to increase to €15bn by the end of this year.
One of the options being looked at is off-loading the remainder of Nama’s portfolio to one of the big investment funds, such as Lonestar or Blackrock.
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