Nama starts to buy back riskiest debt

The day when the State can start receiving some sort of capital return on the National Asset Management Agency is getting closer.

The State-owned bad bank, set up in 2009 and which went on to buy €74 billion of festering commercial property loans from the country’s banks at a 57 per cent discount, last year completed the repurchase of senior bonds used to purchase the loans.

Now it’s the term of the junior bonds, which made up the final 5 per cent of the consideration for the loans back in the day. If Nama made a loss, as many feared when the agency was set up, the banks would be left with €1.6 billion of worthless junior bonds.

However, with Nama now predicting a €3 billion lifetime surplus, it came out earlier this month with an offer to buy back some of the junior debt two years ahead of schedule.

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The bad bank, led by chief executive Brendan McDonagh, confirmed to Cantillon on Wednesday that it had bought back some €243 million of its riskiest debt. It is understood that it rejected some offers as the sellers were looking for more than Nama was willing to pay.

About half of the bonds have been in the hands of capital market investors since the liquidators of Irish Bank Resolution Corporation, formerly Anglo Irish Bank, and Irish Nationwide Building Society sold its €841 million of junior bonds in 2014. Securities attached to these most of notes are currently valued at a 4.5 per cent premium to their par value, according to the latest activity on the bond market. (Last year, AIB sold some €34 million of its €474 million of Nama junior bonds to private investors, according to a surprising disclosure in its latest annual report.)

Nama said on Wednesday that it expected to buy back more of its Nama bonds ahead of their March 2020 due date, “subject to price” – sending a clear signal to would-be sellers not to be too greedy.

It is only after all the Nama junior bonds have been redeemed that the agency can start to hand over excess capital to the exchequer.