Blackstone edges out rivals with €1.1bn offer for O’Flynn debt

Developer Michael O'Flynn's property and construction group is unlikely to have to repay all of the €1.8 billion debt that State agency Nama is selling to US fund Blackstone for €1.1 billion.

It emerged last month that Blackstone was the National Asset Management Agency’s (Nama) preferred bidder for the €1.8 billion worth of property loans given to the O’Flynn group of companies after making an offer understood to be worth €1.1 billion.

The deal, priced at a 39 per cent discount to the loans’ par value, will go through this week.

It is likely to earn a profit for the agency, and is understood to be amongst the best returns it has yet achieved from the sale of various debt portfolios.

The O’Flynn group indicated yesterday that it would work with Blackstone and continue to manage the assets against which the debt has been secured.

Mr O'Flynn, its managing director, said that since the loans transferred to Nama in 2010, the business had always intended to exit the agency. "We note that these loans have now been sold to Blackstone and we believe this will assist us in responding to the opportunities we see in our markets in Ireland, the UK and Europe. "

It is understood that the group will not have to repay the full €1.8 billion originally loaned to it.

Borrowers
Nama confirmed that when it sells loans, the buyer acquires the debtor's full legal par debt. However, the organisations that have been purchasing these debts have not been pursuing borrowers for the full amount.

New York-based Blackstone's bid topped offers from Deutsche Bank, specialist investor Apollo, which bought credit card company MBNA's Irish business last year, and US- based Lone Star.

The offer came to around 61 per cent of the loans’ original value. The agency has sold loan portfolios for as little as 25 per cent of the original amounts borrowed.

The properties involved include the high-rise residential Elysian Tower in Cork. They also include a number of office and commercial building in the Haymarket district of Edinburgh in Scotland and in Frankfurt, Germany.

Student accommodation
Some of the loans are secured against a number of student accommodation blocks the group developed, most of which are in Britain, with some in Ireland, Spain and Germany.

The O’Flynn group’s debts were amongst the first tranche of loans transferred to Nama from the Republic’s banks in 2010.The agency paid an average discount of 57 per cent when it bought property developers’ debts from those lenders. However, it is likely that in the case of the O’Flynn group-related loans, the haircut was less severe.