State’s bad bank fails to take responsibility for another inept hit to the public purse as it improperly sells to someone connected to the original debtor, blaming IT systems.
By Frank Connolly (November edition, Village)
NAMA Chief Executive, Brendan McDonagh, appearing before the Oireachtas Public Accounts Committee (PAC), failed to deliver a credible explanation as to how the agency handled the disposal of a lucrative portfolio of loans which was sold at a significant loss.
The Committee was convened to discuss the investigation by the Comptroller and Auditor General (CAG), Seamus McCarthy, into the dis- posal in 2012 by NAMA of Project Nantes, which was part of the larger Avestus portfolio. Avestus included valuable properties in Europe and the US which in turn were part of the loans of former Revenue Commissioner, Derek Quinlan and the Quinlan Partnership.
According to the CAG, the agency, contrary to its code of practice, “did not seek current inde- pendent valuations of the Project Nantes loans or of underlying property collateral. Furthermore, NAMA did not pursue a competitive sales pro- cess”.The final valuation was short by some €29 million, the CAG said.
Instead, NAMA negotiated exclusively with a US-based fund, Clairvue, which was introduced to the agency by Avestus, the owner of the dis- tressed loan portfolio before it transferred to NAMA.
What emerged from the CAG’s investigation is that Avestus was informed by the agency of the “residual amount NAMA needed to raise through the Project Nantes loan sale in order to achieve its repayment target. The Clairvue offer was very close to that amount”.
At the request of NAMA, Clairvue made a dec- laration that it was not connected to the debtor i.e. Avestus, before it purchased Project Nantes. However, it emerged in 2018 that the loans were purchased by a Luxembourg-based com- pany in which a former Avestus director was in- volved. This revelation by then-TD, Mick Wallace, prompted the CAG investigation.
In his response to the PAC on 8 October last, McDonagh confirmed that NAMA made a loss of €10 million on the sale of Project Nantes and that it had made a miscalculation in setting a tar- get of €125.5 million for the portfolio. He said the mistake was due to the fact that “the transaction occurred early in NAMA’s life cycle when we had no central IT systems and relied on multiple spreadsheets with volumes of data”.
PAC member and FF TD, Marc MacSharry, sought to interrogate McDonagh and his col- league about the weakness of the valuation process and the research carried out by NAMA in relation to the disposal.
“At what point during the normal company searches that can be done did NAMA become aware that somebody was a director and share- holder of both Avestus and Clairvue-Nantes?”, MacSharry asked.
McDonagh said that Avestus and Clairvue had signed a declaration stating that the buyer was not a connected party (to the debtor) but conceded that “it would have been better if Avestus was upfront…”. However, he said “the man was not, nor had he ever been, a NAMA debtor and Avestus was never a NAMA debtor”.
“The only failing was a moral failing on the part of Avestus because it should have been up- front with us and said that one of its colleagues had been asked to be a director of this entity by Clairvue but that he was not a NAMA debtor”, he said.
SF TD, Matt Carthy, asserted that NAMA was ‘played’ by the individual and companies in- volved and should be “angry as hell” at the outcome.
“A guy who was operating for a company that it employed was also a director of the company for somebody who was purchasing the portf lio that was for sale through a non-competitive process…I do not understand why Mr McDonagh is not as angry as hell with this individual and the companies involved because they played NAMA”.
According to McDonagh, he is angry and unhappy that Clairvue-Nantes did not inform NAMA that “one of their colleagues who was not a NAMA debtor was being asked by Clairvue to be- come director of this Luxembourg entity which bought the portfolio”.
Fortunately for McDonagh, he was not more closely questioned on the role played by the NAMA office which dealt directly with Clairvue in relation to the sale.
When Clairvue purchased the Project Nantes portfolio in 2012 its US executives wanted to issue a press release to mark the successful ac- quisition. The NAMA office involved said that the agency did not wish such publicity as “the loans were not openly marketed”. NAMA told Clairvue that “it should be satisfied they acquired the loans at arguably below market value”.
For some members of the PAC there were echoes of the Project Eagle debacle when the massive Northern Ireland portfolio of distressed loans was sold by NAMA in 2014 to US fund, Cerberus, in extremely controversial circumstances. McDonagh deflected the issue by insisting that he was prohibited from discussing Project Eagle due to the ongoing and lengthy inquiry by Judge John Cooke into the controversial sale. One of the reasons it has gone on for so long has been the delay by NAMA in handing over crucial documents to the State investigation.