Was Nama led up the garden path by Treasury manoeuvres?
BUSINESS OPINION:IT IS unlikely that the expected liquidation of Treasury Holdings tomorrow will be seen as the National Asset Management Agency’s finest hour, but it appears to have been necessary and unavoidable.
KBC Bank may actually be pulling the trigger, by seeking to appoint a liquidator, but the fate of Treasury Holdings was sealed by Nama at the start of the year. Back in January, the agency – owed some €1 billion by Treasury – abandoned talks about restructuring the company and moved to call in the loans on a number of Treasury properties.
Treasury seemed genuinely baffled by Nama’s move. It claimed to have two interested parties prepared to invest – the Australian bank Macquarie and the international property group Hines.
Neither deal was all that favourable for Nama as both required a hefty chunk of vendor finance. Nama would, in effect, be lending the buyers the money to repay Treasury’s loans to Nama. The net reduction in Nama’s loan book would be relatively small and its security weaker.
Both deals also envisioned the continued involvement of Treasury and its owners in the management of the properties. In particular, they involved big management fees for Treasury and a share in any future profits for its owners Richard Barrett and Johnny Ronan.
In many ways, the deals were exactly the sort of builder bailout that many feared Nama was being set up to provide. Ronan and Barrett would essentially have been refinanced by the taxpayer while keeping operational control of their assets and earning big fees. The icing on the cake would have been for them to buy the assets back from Hines or Macquarie a few years down the line.
They were not great deals and, potentially, could be very bad deals for the taxpayer. But they were deals none the less and it was a buyers’ market. But Nama did not bite.
What is clear is that, at some point late last year, Nama stopped believing that Ronan and Barrett were acting in good faith and started to suspect that Treasury was gaming it.
It seems, from the various court actions and counteractions launched since, that Nama was very unhappy about the transfer by Treasury of €20 million worth of shares in a Chinese property company to Barrett and Ronan just ahead of Treasury going into Nama. Other issues were alluded to in court, but not specified.
The counterargument was that Nama was paranoid or naive and lacking experience of the three-dimensional chess game swathed in Borgia-esque levels of intrigue and double-dealing that is the Irish property market. Treasury certainly maintained an air of injured innocence. The company seemed genuinely puzzled at Nama’s refusal to re-engage in negotiations on a restructuring.
The events of the last few weeks appear to have justified Nama’s stance. It came to light that, at the time Treasury had supposedly been bending over backwards in a final effort to do a deal with Nama, Barrett had moved to put certain Chinese assets beyond Nama’s reach. A Channel Island company owned by Barrett bought two Treasury subsidiaries that ran Treasury China Trust (TCT), the Singapore-quoted company that houses his and Ronan’s main Chinese ventures. All of this was happening while Treasury was trying to get Nama to the table with Morgan Stanley and to look at other solutions.
Once the details of the Chinese deal emerged, it was hard to see any other solution outside of some sort of wind-up of Treasury.
The story is far from over, however, as the Treasury liquidator will presumably seek to overturn that sale to Barrett of the two key controlling entities associated with TCT. He would seem to have a prima facie case because – as reported in this paper – internal TCT valuations put a far higher price on the companies than that paid by Barrett.
The battle for Treasury Holdings is over but the battle for TCT has probably only begun. It will be long and expensive.
The question that will probably never be properly answered is whether Nama would have been better to take one of the deals brought to it by Treasury. They certainly would have been cleaner solutions than the mess it now has on its hands. There is also the wider issue of what might have been better for the Dublin property market in the round.
The net issue is whether Nama’s judgment regarding Barrett and Ronan’s bona fides or apparent lack of them was correct. The Chinese saying “Fool me once, shame on you. Fool me twice, shame on me” seems apt.