C&AG’s Project Eagle report will heighten calls for inquiry

At some point on Wednesday the Comptroller and Auditor General’s report into the Project Eagle sale in Northern Ireland by Nama more than two years ago will be published.

As revealed by The Irish Times last weekend, the report will show "shortcomings" and "irregularities" in the process that could have resulted in "hundreds of millions of euros" not being realised from the Project Eagle sale.

By all accounts, Nama will robustly defend its handling of the sale and outline why it believes the C&AG’s analysis of the transaction to be wrong. It is highly unusual for a State agency to challenge the C&AG in such a manner and it will be interesting to see how this ultimately plays out.

Whatever Nama’s defence, the C&AG’s report will only heighten calls for an inquiry into the whole episode and add to the Government’s discomfort on the matter.

Nama claims clean hands in all of this (a position that might well be vindicated in time) but the drip, drip nature of the allegations surrounding Project Eagle means an inquiry is inevitable.

At this stage, you’d imagine that Nama would want an inquiry to be held to vindicate its position and prove once and for all that it did a good job for taxpayers on the transaction.

Fight fires

Nama is having to fight fires on a number of fronts at present. On Saturday, I reported that five Irish property developers had supplied additional information to the European Commission in July to support their claim that Nama's plan to build 20,000 housing units by 2020 amounted to illegal State aid.

Their submission alleges that Nama has been willing to write off millions of euro in loans for certain debtors and has also charged little or no interest on borrowings related to some of its connections.

The developers argue that such sweetheart arrangements were not available to them from banks and this put them at a significant financial disadvantage in terms of competing with Nama debtors on developing and selling properties.

They claim that Nama debtors enjoyed an economic advantage as a result of access to funding, and site values at lower rates than available to private developers.

Nama denies these charges and we should expect the agency and the State to fight their corner with the commission.

At best, it’s a big distraction to Nama’s plan of delivering 20,000 affordable new homes, mostly in the greater Dublin area by 2020. At worst, it could scupper the plan altogether.

The developers are seeking a suspension injunction, which would effectively require Nama to down tools on its residential building programme while the complaint is considered.

Otherwise, they argue, Nama’s building programme would be largely completed by the time the commission would have concluded its investigation and delivered a verdict.

Nama never sought this mandate, of course. It was given to the agency by the Fine Gael-Labour government in advance of the last election when the housing crisis became a live issue of debate.

Nama was set up to be a work-out vehicle for problem loans rather than a house builder. Given the recovery in the economy since 2013, it should be winding down rather than cranking up.

Soldier on

The board of Nama had originally planned to fold its tent by 2018, two years early. But the Government’s housing mandate forced them to soldier on until the original deadline of 2020.

The truth is that the State doesn’t need Nama to do this work. There are enough other agencies to manage the finance, and co-ordinate the plan.

Nama has already paid off 85 per cent of the €30.2 billion in senior debt that it raised at inception to buy loans from the five Irish banks. It will most likely pay off the balance next year. That’s another box ticked. An important one as it happens, given that taxpayers were on the hook for any outstanding balance.

After that, it’s simply a matter of selling off the remaining loans and assets. Again, this work is largely completed. By the end of 2015, the carrying value of its remaining loans amounted to €7.8 billion with half of its portfolio in Dublin.

Brexit aside, the economy is back up and running and selling these assets for a good price shouldn’t be a problem.

It’s then just a matter of Nama handing over any surplus. Its last update, suggested a €2.3 billion profit but an early wind-up might lower this number.

Nama played an important role in helping the State to repair the financial sector but it is arguably getting in the way now, both politically and in terms of our economic development.

Now might be the time for the Government to thank Nama for its work, send it on its way and move on.

Twitter: @CiaranHancock1