Pimco made strongest play for Nama’s Northern property assets, PAC hears
US fund manager did not want to exit sale, Nama chairman Frank Daly tells committee
Nama chairman Frank Daly (left) and chief executive Brendan McDonagh yesterday. Photograph: Dara Mac Dónaill
A number of potential buyers were eyeing Nama’s Northern Irish property loans in mid-2013, but US fund manager Pimco made the strongest play for the assets during the second half of that year.
The deal is at the centre of a series of allegations sparked by the transfer of £7 million from Belfast law firm Tughans, which advised on the sale, to an Isle of Man bank account controlled by its managing partner, Ian Coulter, who resigned in January.
Another law firm, US-based Brown Rudnick first made overtures to the North’s then minister for finance and personnel, Sammy Wilson, in 2013. He forwarded the query to his opposite number in Dublin, Michael Noonan, who passed it on to Nama in June.
The lawyers indicated that they had two clients interested in the loans. Nama’s chief executive, Brendan McDonagh and its chairman, Frank Daly, told the Dáil’s Public Accounts Committee (PAC) that one of those turned out to be Pimco. They were not sure if the second was Cerberus, which ultimately secured the portfolio for €1.6 billion.
Brown Rudnick approached Nama directly in September indicating that Pimco was interested in buying the entire portfolio, made up of 850 loans to borroweres in the North secured against properties on both sides of the Border, as well as Britain and elsewhere.
Pimco and Nama held a number of meetings. The fund manager wanted an exclusive deal rather than the open market auctions that the Irish agency had used to sell other assets up to that point. However, Nama opted to stick with the approach it had used in the past.
In January it hired property agency Lazards to handle the sale. That firm invited the nine investors that it believed had the wherewithal to pay for the portfolio, dubbed Project Eagle, to take part in the process. Along with Pimco and Cerberus, they included a list of by now familiar names, Blackstone, Starwood, Apollo Capital, Oak Tree Capital, Lone Star, Goldman Sachs and Fortress.
McDonagh says that six dropped out without bidding, leaving three serious potential buyers: Pimco, Fortress and Cerberus. However, Pimco told Nama on March 10th that it had agreed to pay £5 million sterling to Frank Cushnahan, a former member of the agency’s Northern Ireland Advisory Committee, if it succeeded in buying the portfolio.
The payment was to be his share of an overall £15 million success fee that Pimco had agreed to pay him , Tughans, where Cushnahan had an office, and Brown Rudnick. Daly stressed that Nama told no one on its advisory committee about Pimco’s approach in September.
PAC members yesterday argued that £15 million seemed an enormous sum of money for landing the deal. Daly responded by saying that fees for a transaction like Project Eagle “can be of scale”. However, he was quick to assure TDs that Nama paid its legal advisers on the transaction, London firm Hogan Lovells, €1.8 million.
Some sources argued earlier this week that advisers’ fees on large scale deals are calculated as a percentage of whatever is paid, say 1 per cent or 1.25 per cent. Allowing for Nama’s reserve price of €1.3 million, £15 million sterling was at least at the upper end of those calculations.
In any case, the £15 million did not materialise, as Pimco had to drop out. Nama once again told the PAC yesterday that it told the fund manager that it would have to leave voluntarily or be told to go. Pimco itself said earlier this week that it withdrew of its own volition on March 14th after telling the agency that third parties had approached it seeking payment.
Daly contradicted this version twice in the course of yesterday’s hearing. “The whole tenor of their approach and their reaction was that they did not, in my view, want to exit the sale, they very much wanted to stay in it,” he said.
Shortly after Pimco left, Cerberus told Nama that it was bringing Brown Rudnick and Tughans on board as strategic advisers. The US firm already had A&l Goodbody and London firm Linklaters acting for it.
Daly and McDonagh argued that they had no control over who Cerberus hired as advisers, and stressed that their only concern was ensuring that Cushnahan was not involved in the successful bid. The US fund assured them of this.