Frank Daly: Nama is right and the C&AG is wrong

State watchdog has no expertise in valuing loans and does not live in a commercial world

As of today there are two official versions of what happened with Nama’s sale of Project Eagle and the price achieved. They cannot both be true.

The key difference between the Nama board’s view and the Comptroller and Auditor General (C&AG) report relates to the discount rate used to calculate the value of the loans.

The C&AG report assumes that Nama should apply the same discount rate to poorer-quality Northern Ireland and regional UK loans as it did to much higher-quality prime assets in Dublin and London.

The Nama board’s view is based on valuation assumptions and appropriate discount rates largely accepted by the market. The C&AG version is based on assumptions not supported by experts in the loan sales market.


It appears to be a small technical point, but it has very significant implications that underpin the price we were prepared to accept.

The Nama board’s view is that Nama was right to sell Project Eagle. We have said it all along. The report, however, says: “This report draws no conclusion about the merits of the decision.”

To Nama, the merits are clear. Nama’s conclusions are commercially sound.

Generating £1.322 billion in cash from a portfolio that is worth much less today was the right thing to do. The report draws no conclusion on this.

Selling to the highest bidder was the right thing to do. The C&AG report draws no conclusion on this.

Eliminating Irish taxpayers’ unwanted exposure to undeveloped land in Northern Ireland and poorer-quality assets elsewhere in the UK, at a price that made commercial sense, was the right move. The report draws no conclusion on this.

Our conclusions are based on solid facts.

Abandoning Project Eagle would have left Irish taxpayers exposed to the huge risks and costs thrown up by Brexit. The report says nothing about this.

Abandoning Project Eagle would have made it much harder for Nama to sell other loan portfolios and generate gains for the State, such as the €1 billion profit we made from our Project Jewel loan sale. The C&AG report says nothing about this.

Abandoning Project Eagle in 2014 would also have put at risk the multibillion-euro proceeds of loan sales by other State-owned lenders and the IBRC liquidators, thereby keeping the contingent liabilities of the State unsustainably high. Again, the C&AG says nothing about this.

In essence, the report says Nama may have been able to obtain more for Project Eagle if it had not sold it or if it had found someone else – unknown to Nama and our adviser, Lazard – who was willing to pay more. However, independent experts, such as KPMG, Eastdil Secured, Cushman and Wakefield, and Lazard, have supported Nama's view on the appropriate discount rate used by bidders and the resulting minimum price of £1.3 billion.

But how could there be such a huge chasm between Nama and market expert professionals on one side, and the C&AG report on the other? Nama made every effort to bridge this gap over the past few months, but we were unsuccessful. The C&AG declined to meet the Nama board or the experts who supported us. It also stated last year that it needed specialist expertise to review Nama loan sales.

We are certain that the report would have been very different if it had proceeded with the plans it announced last year to hire external market or loan sale specialists. But it did not do this.

The C&AG opted instead to use its own in-house staff, who e are very capable and professional but who do not have any experience of loan sales.

That said, I would encourage anyone to read the C&AG report. People will then see that media suggestions about the C&AG finding “irregularities” in Project Eagle are not true. They will see the report made no mention of these.

They will see that the report confirms our position that neither Frank Cushnahan nor any other external member of Nama's Northern Ireland Advisory Committee had access to confidential Nama information that could have been passed to any bidder.

They will see that the report established no link whatsoever between the alleged actions of Frank Cushnahan and the £1.322 billion sales proceeds ultimately achieved by Nama.

And they will see that the report implies that we may have been better off if we had held on to Project Eagle or that there may have been a different way to do this deal. But the report offers no information on what that better deal would have looked like.

If there was any wrongdoing, it was not by Nama. We have always said the alleged wrongdoing arose on the buy side of the transaction and, if any such wrongdoing is established, the appropriate authorities will be obliged to take action. That is only right.

Nama has to operate in the real world, dealing with real bids, not hypothetical suggestions. Does anyone truly think that in a post-Brexit environment, with the resultant fall in UK property values, we would be better off if we still owned those loans? I doubt it.

Frank Daly is chairman of Nama