Nama to pay coupon on junior debt for first time

The National Asset Management Agency (Nama)is set to distribute its first optional coupon on junior bonds used as part payment to the nation's banks for their risky commercial real-estate loans, Bloomberg is reporting.

Nama will pay the discretionary coupon on about €1.6 billion of subordinated debt, which carry a 5.264 per cent coupon, after profit rose in 2013 and as it grows more optimistic about its outlook, it is understood.

In 2010, Nama bought €74 billion of loans from five lenders at a discount of 58 per cent. About 95 per cent of the payment was in senior Nama bonds, with the remainder in subordinated bonds.

The junior securities, which carry a discretionary coupon, will only be redeemed if the agency beats its target of repaying all its senior debt by 2020. Nama declined to comment on the report.

Ciaran Callaghan, senior credit analyst with Merrion Stockbrokers, said that the activation of coupon payments on the subordinated notes represents "a major development in the history of the Irish property agency".

He said the move illustrated Nama’s “ improved financial position and the confidence management has in its outlook”.

Mr Callaghan estimated that the Nama cash coupon was worth about €25 million and €15 million of income annually to AIB and BOI respectively, based on their outstanding Nama subordinated bonds of € 471 million and € 279 million.

The liquidated IBRC also had about € 843 million of the subdebt. He said the move by Nama would allow banks to increase the carrying value of the bonds.