Special Report 109 - NAMA’s management and disposal of the Project Nantes loans

Published on 19 March 2020

The National Asset Management Agency (NAMA) was established in 2009 to acquire property- related loans from Irish financial institutions to assist in their stabilisation. NAMA was to hold and manage the loans temporarily, and dispose of them so as to obtain the best achievable financial return.1

During 2018, concerns were raised with the Committee of Public Accounts of Dáil Éireann and with the Office of the Comptroller and Auditor General about the sale by NAMA in 2012 of certain loans, to a Luxembourg-based company, Clairvue-Nantes Luxco SARL (Clairvue). The concerns raised about the loan sale, which was referred to by NAMA under the code name Project Nantes, were around

  • the adequacy of the process used by NAMA when selling the Project Nantes loans
  • the price achieved for the loans
  • whether the sale had breached statutory restrictions on the sale by NAMA of bank assets.

The Comptroller and Auditor General decided to carry out an examination of NAMA’s acquisition, management and disposal of the loans in accordance with the provisions of Section 9 of the Comptroller and Auditor General (Amendment) Act 1993.

Acquisition of the loans by NAMA

The Project Nantes loans were part of a bigger portfolio of loans being managed by a firm of investment managers called Avestus Capital Partners (Avestus). Avestus was formed in March 2010 by four principals of the previous five-person Quinlan Partnership (the QP partners). It took on the asset management business and staff of the Quinlan Partnership, but the Quinlan Partnership remained liable to repay the loans. When NAMA acquired the Avestus loans in 2010, they were classified as part of a larger Quinlan debtor connection (see Figure 1).2

Special Report 109 - Figure 1


1 Section 10, National Asset Management Agency Act 2009.

2 The scope of the Avestus loan portfolio was defined in NAMA’s correspondence with the PAC (in 2018). See Appendix A.

The Avestus loan portfolio acquired by NAMA comprised a total of 165 separate loans, with a combined par value at acquisition of €489 million.1  The portfolio comprised

  • loans with a par value of €220 million backed by a first charge on property collateral
  • loans backed by an equity interest in property/developments with a par value of €261 million2  and
  • two ‘deposit-backed’ loans with a par value of €7.4 million.

The collateral behind the property-backed loans was widely geographically dispersed. Around a quarter was located in Ireland (see Figure 2). The rest was located in a range of European countries and in the US. A substantial part of the equity-backed loans was related to properties located in other European countries.

Special Report 109 - Figure 2


1 Par value refers to the full amount owed by the borrower based on the original terms and conditions with the participating institutions and without taking account of any discount applied by NAMA when acquiring the loan.

2 Figure 2.3 (page 21) presents an explanation of equity-backed loans.

The Avestus loans were acquired in line with NAMA’s standard acquisition policies and procedures, including property and loan valuations. NAMA paid €123.6 million for the loans — an average discount of 75%. All the equity-backed loans were acquired at an effective nil value, reflecting NAMA’s general view that returns on such loans were highly uncertain.

NAMA's management of the Avestus loans

NAMA’s standard operating model required debtor connections to submit business plans, setting out how they proposed to discharge their debt to NAMA.

In February 2011, the QP partners submitted a business plan to NAMA in relation to the Quinlan Partnership loans, which was subsequently generally referred to as the ‘Avestus business plan’. For planning purposes, NAMA linked another property-backed loan secured on an office development in Paddington, London, with the Quinlan Partnership loans. NAMA identified two potential options for working out that loan portfolio. These were

  • a medium to long-term mixed process of ‘sell and hold’ along the lines proposed in the Avestus business plan, or
  • a short-term option involving completion of asset sales already in progress combined with an immediate refinancing of the remaining loans.

A paper presented to the NAMA Board in July 2011 favoured the short-term refinancing option so long as a target level of proceeds (€125.5 million) was achieved from holding and disposal of the assets. This target was based on NAMA’s then estimated cost of acquisition of the loans i.e. €100.7 million, and expected advances of additional credit to Avestus of €4.2 million (i.e. a total of €104.9 million). The NAMA Board formally approved the strategy outlined in the paper.

NAMA has confirmed that it informed Avestus of the repayment target it aimed to achieve, and that Avestus had six months to meet the target. Despite the importance of this exchange of information, NAMA did not document the communication process, or put its proposal in writing to Avestus. As a result, there is no record of the scope of the proposal put to Avestus, in terms of the loans included in the offer.

Proceeds of the Avestus loans

NAMA realised a total of €204.1 million in disposal and non-disposal1 proceeds from the whole Avestus loan portfolio. Taking account of the €123.6 million2 acquisition cost, and a further €12.7 million advanced by NAMA, the total outlay on the loans was €136.3 million. As a result, NAMA achieved an overall cash surplus of €67.8 million on the Avestus portfolio. NAMA’s internal rate of return on the whole portfolio was 29%.

NAMA has stated that given the acquisition value for the Avestus loans of €123.6 million, it is strongly of the view that the value of the proceeds it received was the best commercial outcome achievable at that time and implemented in full the NAMA Board approved strategy of disposing of the whole Avestus connection and not different parts on a piecemeal basis.

The Avestus loans were disposed of or settled in eight transactions/loan bundles.3 The gains/losses generated for each block are summarised in Figure 3. There was a significant loss only in the case of Project Nantes.

Special Report 109 - Figure 3


1 Non-disposal proceeds include rent, service charges, interest payments, etc.

2 The July 2011 Board paper had underestimated the acquisition cost by almost €23 million, mainly due to the omission of certain loans and a significant error in the acquisition value of one loan.

3 The bundles refer to assets disposed of at the same time to the same purchaser. Further detail is provided at Appendix B.

Windfall gain of €25 million (loan 1)

One of the equity-backed loans in the Avestus portfolio accounted for €51 million or 10.5% of the par value at acquisition. This was acquired by NAMA at an effective nil acquisition cost. Before the loan transferred to NAMA on 1 November 2010, the related property located in Knightsbridge, London had been sold. NAMA received €25.3 million in respect of the equity interest in the loan. This represented a windfall gain for NAMA.

The residual balance on the loan was transferred to Clairvue with the Project Nantes loans.

Loan write-off of €6.1 million (loan 2)

Loan 2 was secured on a Quinlan Partnership equity holding attached to a substantial development property in Dublin. The senior debt on the property was a loan to a different NAMA debtor, also acquired by NAMA. NAMA acquired loan 2 for €1. At the time, the par value of the loan was €6.1 million.

The related property was sold in April 2011, and the proceeds of the sale were credited to the senior loan debtor. None of the proceeds were available to repay the Avestus equity-backed loan. Nevertheless, the Avestus loan was written off by NAMA. Subsequently, for the purposes of the repayment target, NAMA treated the loan as having been repaid in full.

Other loan transactions (loans 3 to 6)

Other loans in the Avestus portfolio were resolved through a number of Avestus-managed property sales in the second half of 2011 (loans 3 to 5) or full repayment of the par debt (loan bundle 6). In these cases, NAMA broke even or made small gains.  

The outstanding balances on loans 3 and 4 were subsequently written off by NAMA. The outstanding balance on loan 5 transferred to Clairvue with the Project Nantes loans.

Gain of €46 million from holding loans (loan bundle 8)

NAMA paid almost €48 million for the Paddington senior debt loan, when the related property was 29% let. It also acquired a QP partner’s equity-backed loan related to the property, for which it effectively paid nothing. In October 2011, NAMA agreed in principle to a proposal from third-party investors introduced by Avestus who were willing to refinance the senior loan for €55 million. In early 2012, NAMA became aware of additional leases that had been signed with new tenants bringing the occupancy level to around 62%, and significantly increased the value of the property. NAMA decided to change its strategy and to retain both loans. Ultimately, NAMA advanced a further €10.3 million to meet fit-out and other costs. When the finished development was sold in mid-2013, NAMA realised a total of €104.1 million on the two loans. The resulting cash surplus on the Paddington loans was €45.9 million.

The Project Nantes loan sale

The bundle of residual loans included in the Project Nantes sale was mixed, comprising loans related to properties in Ireland, the UK and a wide range of other European states. The types of property included hotels, offices, and retail, industrial and residential units. While the bulk of the portfolio comprised Quinlan Partnership loans, personal loans of the QP partners were also included in the sale. The personal loans had a par value at acquisition of €28.7 million, for which NAMA paid €9.3 million. This payment comprised €9 million paid for property-related loans and €0.3 million paid for ‘deposit-backed’ loans.

Avestus offer

In August 2011, Avestus informed NAMA that it had sourced a firm which was interested in acquiring the remaining Avestus debt from NAMA. This firm was identified as Clairvue Capital Partners (Clairvue), a private equity firm based in San Francisco.

In October 2011, Clairvue submitted a schedule of loans it proposed to acquire and made an offer of €29 million for the loans, subject to completion of its due diligence. A month later, NAMA agreed to grant ‘exclusivity’ to Clairvue in relation to the loan sale until the end of January 2012. A sale was agreed between the parties in January 2012, for a price of €26.67 million. The main reason for the reduction (of €2.3 million) from the initial Clairvue offer was NAMA’s decision to retain the equity-backed loan related to the Paddington property.

NAMA's sales process

Securing independent current asset valuations prior to any disposals, along with a competitive marketing process, are the normal strategies for ensuring financial returns are maximised. Where a competitive process is not being followed, independent current valuations become particularly important.

The Minister for Finance approved a code of practice for NAMA’s disposal of bank assets in July 2010. This required NAMA to obtain current independent appraisals of bank assets prior to disposal. The requirement for pre-sale asset valuations was reiterated in NAMA’s own loan sales policy, which was approved by the NAMA Board on 8 September 2011.1

In the case of the Project Nantes loan sale in January 2012, NAMA did not seek current valuations of the loans or of the underlying property collateral, and did not pursue a competitive sales process.


1 NAMA’s loan sale policy states that “in accordance with the NAMA code of practice on the disposal of bank assets, the loan sale advisor (or a third party appointed to work with the advisor) must provide a desktop valuation of each of the assets to be sold”.

Sales price

Absent the assurance that would have been provided by independent current asset valuations and a competitive process, the repayment target set by the Board is significant. NAMA had informed Avestus of the overall repayment target, and agreed adjustments to the target with Avestus as assets were sold or withdrawn. As a result, the residue of the repayment target became NAMA’s price for the Project Nantes loans.

Errors and poor analysis by NAMA meant that the residual repayment target for the Project Nantes loans was significantly lower than it should have been. NAMA did not identify that the €9.4 million it had paid the banks for the property-backed personal debts of the QP partners had not been built into the Board-approved refinancing target. NAMA also failed to see that the acquisition value of one of the loans underpinning the target had been understated by €16.1 million. Had the full scope of the loan portfolio been consistently and accurately reflected in the original repayment target, the residual target to be achieved through the Project Nantes loan sale would have been of the order of €56 million i.e. about €29 million more than was achieved in the sale.

Had NAMA set a higher repayment target for the Project Nantes loans, there is no guarantee that a sale could have been concluded at that higher price. Where a competitively based market price for the Project Nantes loans could have been struck cannot now be known. Nevertheless, it is difficult to conclude that NAMA secured the best possible price for the sale of the Project Nantes loans.

Without a contemporaneous asset valuation and a competitive sales process, there is no basis to conclude that NAMA achieved the best possible financial outturn from the Project Nantes loan sale.

Compliance with section 172 of the NAMA Act

The requirements of section 172 (3) of the NAMA Act 2009 (the NAMA Act) prohibits NAMA from selling a property to a debtor (or an associated debtor, as defined in the NAMA Act) who is in default in relation to any loan acquired by NAMA. However, this restriction is limited, and does not apply to the sale by NAMA of a loan/loans.

Notwithstanding the limitations of application of section 172, NAMA required those purchasing loans to make a declaration confirming that the purchaser was not connected to the debtor whose loans it was purchasing.

Clairvue and the QP partners separately made the declarations required by NAMA. In addition, Clairvue disclosed to NAMA the nature of the fee and performance-related compensation arrangements Avestus had with Clairvue, including arrangements for a number of the QP partners to redeem personal loans at a future date. NAMA stated that it considered those arrangements at the time, and considered they were an acceptable part of the transaction that did not impact on NAMA.

NAMA has stated that it was not made aware of the appointment of one of the directors in Avestus (not a NAMA debtor) as a director of Clairvue. However, following recent enquiries with Clairvue, NAMA has concluded that the appointment did not result in Clairvue becoming a connected person of the QP partners or of Avestus Capital Partners.