- stg£1.322 billion was the best achievable result

- Report’s key finding is based on an incorrect assumption regarding the discount rate used to value Northern Ireland loans – it incorrectly assumes NAMA should apply the same discount rate to poor quality Northern Ireland loans as it did to much higher quality assets in Dublin and London 

- NAMA’s position on the key issue of the discount rate is supported by 4 specialist international firms (KPMG, Eastdil Secured, Cushman & Wakefield and Lazard). C&AG’s position is unsupported by the market. 

- Report was carried out by C&AG staff with no market experience of loan sales after C&AG did not proceed with its plans to recruit loan sales experts or similar specialists it had said were necessary to assist with its review 

- Contrary to some earlier media reports, C&AG report makes no claim of irregularities

NAMA Chairman Frank Daly comment: 

“It is clear to us that, if NAMA had retained the Eagle portfolio, there would be no investor interest in buying it today – or in the foreseeable future – at anything close to the stg£1.322bn price that was actually achieved”. 

Wednesday, 14^th September 2016

The Board of the National Asset Management Agency (NAMA) has categorically rejected the key conclusions reached by the Comptroller and Auditor General (C&AG) in its report on the sale of Project Eagle. 

The report’s key finding is based on an incorrect assumption regarding the discount rate used to value the portfolio. It incorrectly assumes NAMA should apply the same discount rate to this poor quality loan portfolio as it applied to much higher quality assets in Dublin and London. As a result the report overstates the estimated value of this portfolio. 

NAMA’s view of the discount rate is supported by four specialist international firms (KPMG, Eastdil Secured, Cushman & Wakefield and Lazard). The C&AG’s position is unsupported by the market. 

The report fails to provide any expert support for its use of the 5.5% discount rate on which its main finding is based and ignores compelling market evidence which supported NAMA’s use of a discount rate in the 10%-15% range. This key finding of the report is therefore fundamentally unsound and unstable and cannot be left unchallenged. 

If the evidence of market experts on the discount rate is accepted, the price actually achieved on the Eagle sale was the best price achievable in the market and there was therefore no ‘probable loss’ by reference to the market price.

The Board remains of the strong view that the sale of the Project Eagle portfolio for stg£1.322bn was the best achievable outcome.  

The C&AG explicitly states that the “report draws no conclusion about the merits of the decision” by NAMA to sell the portfolio [point 18, page 11 of Executive Summary].  

Contrary to some media reports in recent days, there are no findings of irregularities in the sale process. 

The report’s conclusion that a better price could have been achieved is hypothetical and highly speculative. It produces no credible evidence to show any other buyer or group of buyers would have paid more than was achieved.  

The report also produces no evidence to show the State would have been better off working out the portfolio over a period of years. It makes no mention of Brexit and the overwhelmingly negative impact this is likely to have on the value of Northern Ireland assets.  

In addition, the report fails to address the enormous cost and unprecedented market consequences to Ireland and the sovereign of stopping a competitive sale process where a price in excess of the £1.3 billion target price was achieved by NAMA.

NAMA’s position on the key issue of the discount rate is supported by 4 specialist international firms (KPMG, Eastdil Secured, Cushman & Wakefield and Lazard). 

C&AG’s position is unsupported by the market.

 §  A number of the C&AG report’s main assumptions are not supported by market knowledge or expertise. The discount rate used by the C&AG to calculate what it describes as “the probable value” of the portfolio is not used in the loan sales market. Using this incorrect rate resulted in the C&AG report’s “probable” value being markedly higher than any other actual value calculated by market bidders.  

 §  NAMA’s position on the key issue of the appropriate discount rate is supported by 4 specialist independent firms – KPMG, Eastdil Secured, Cushman & Wakefield and Lazard, firms that are among the global leaders in advising and performing loan sales. Ultimately the market value of any loan portfolio is determined by what market participants are willing to pay for it based on an appropriate discount rate. 

Report was carried out by C&AG staff with no market experience of loan sales after C&AG did not proceed with its plans to recruit loan sales experts or similar specialists it had said were necessary to assist with its review 

 §  The C&AG stated last year that it needed expert assistance to review NAMA’s loan sales – including Project Eagle. Although it began a procurement process to hire specialist corporate finance experts, this process was not completed.

 §  In the case of Project Eagle, its decision to rely on in-house staff with no experience of loan sale transactions meant it did not have the benefit of market experience. 

Report finds no member of NAMA’s Northern Ireland Advisory Committee had access to confidential NAMA information on any debtor or asset

• The report establishes no link between the actions of Frank Cushnahan and the outcome of the sale process or the sale price ultimately achieved. 
• The report finds and confirms NAMA’s position that no member of the Northern Ireland Advisory Committee had access to confidential NAMA information on any debtor or asset. 
• This is consistent with the long-established position of the NAMA Board. 

Comments by NAMA Chairman Frank Daly

• “NAMA has the utmost professional respect for the C&AG and his staff. The C&AG has performed a very important role in scrutinising our decisions and auditing our accounts over the past 7 years but, regrettably, the key conclusions in this report are without the relevant loan sale market expertise and as such we have no option but regretfully to reject them categorically.”   
• “The C&AG report is based on a key assumption (the lower discount rate) that has no market support and is contrary to evidence presented by four of the world’s leading authorities on loan sales.” 
• “We believe the report would have been very different if the C&AG had used the experts it had acknowledged were necessary prior to carrying out this review. The C&AG tried to address this by beginning a process last year to bring in this external market expertise but it did not complete this process.”  
• “There is nothing in the report that changes the unanimous view of the NAMA Board that the Project Eagle sale was the best achievable outcome for the State either back in 2014 or now in a post Brexit environment.”
• “It is clear to us that, if NAMA had retained the Eagle portfolio, there would be no investor interest in buying it today – or in the foreseeable future – at anything close to the stg£1.322bn price that was actually achieved”. 

Back