TITHE AN OIREACHTAIS AN COISTE UM CHUNTAIS PHOIBLÍ TUARASCÁIL Scrúdú ag an gCoiste um Chuntais Phoiblí ar Dhíol Project Eagle ag GNBS Márta 2017 _________________________ HOUSES OF THE OIREACHTAS COMMITTEE OF PUBLIC ACCOUNTS REPORT Examination by Committee of Public Accounts of NAMA’s Sale of Project Eagle March 2017 32/CPA/001 PAC Report on NAMA’s Sale of Project Eagle CONTENTS Chairman’s Preface ............................................................................................. 5 Main Facts in this report ...................................................................................... 7 General Conclusions and Remarks Related to Publication of Report ..........................13 Conclusions Arrived at in Body of the Report .........................................................15 Sale of Project Eagle Timeline .............................................................................20 Introduction ......................................................................................................21 Note on Use of Sterling in this Report.............................................................. 23 Committee’s Role and Ongoing Investigations .......................................................24 Background to the Establishment and Role of NAMA...............................................25 NAMA Oversight and Accountability Arrangements .................................................27 Role of the Minister For Finance ........................................................................27 NAMA Committees ..........................................................................................28 Northern Ireland Advisory Committee (NIAC) ........................................................28 NIAC Membership ......................................................................................... 29 NIAC External Members’ Declarations of Interest .............................................. 31 Financial Summary of Acquisition and sale of Northern Ireland Loan Portfolio ............32 Original Par Value of Bank Loans Acquired by NAMA ............................................32 Acquisition Price Paid by NAMA .........................................................................33 Movement in Loan Values Post-Acquisition by NAMA ............................................34 Transaction Proceeds and Losses Incurred by NAMA ............................................35 Total Losses Measured Against Par Value at Acquisition .......................................35 Losses Incurred by NAMA, 2010 to 2014 ............................................................36 Cerberus: The Successful Bidder .........................................................................37 Focus on Project Eagle .......................................................................................39 Events Leading to Expression of Interest in NAMA’s NI Loan Portfolio .......................39 Events Leading up to NAMA’s Receipt of an Indicative Bid .......................................41 2 PAC Report on NAMA’s Sale of Project Eagle NAMA’s Consideration of the PIMCO Bid and of Alternative Sales Options ..................43 The Board Meeting of 12 December 2013 ...........................................................44 Analysis of PIMCO Bid ................................................................................... 44 Marketing Issues .......................................................................................... 45 Price Analysis of Project Eagle Portfolio ........................................................... 45 Risk Management ......................................................................................... 50 The Board Meeting of 8 January 2014 ................................................................50 The Board meeting of 16 January 2014 ..............................................................54 Lazard as Loan Sale Advisor ................................................................................54 Media Report on Sale of Northern Ireland Portfolio on 13 February 2014 ..................55 The Board Meeting of 13 February 2014.............................................................55 Events Following Media Reports ...........................................................................56 NAMA’s Actions Following Disclosure of Success Fee Arrangements by PIMCO ...........59 The Board Meeting of 11 March 2014 .................................................................59 The Board Meeting of 13 March 2014 .................................................................60 The Sales Process after PIMCO Success Fee Disclosure ...........................................61 Remaining Bidders: Cerberus and Fortress............................................................62 The Disclosure by Cerberus of Success Fee Arrangements ......................................64 The NAMA Board Meeting of 3 April 2014 ...........................................................65 Lazard’s Post-Sale Report and ‘Comfort letter’ .......................................................67 Appendix 1 Committee Membership ..................................................................69 Appendix 2 Glossary of Key Terms ....................................................................71 Appendix 3 List of Main Bodies/Persons Pertinent to this Report ...........................74 Appendix 4 Committee Terms of Reference ........................................................77 Appendix 5 Witnesses Who Provided Oral Evidence and Links to Transcripts ...........79 Appendix 6 PAC Minutes 8 March 2017 ..............................................................86 Appendix 7 Letter from Minister For Finance .......................................................89 3 PAC Report on NAMA’s Sale of Project Eagle Appendix 8 Key Currency Values Sterling/Euro ...................................................92 Appendix 9 Sources Cited in this Report ............................................................93 Table 1 TIMELINE............................................................................................20 Table 2 NAMA’S NI DEBTORS, ACQUISITION VALUE OF LOANS.............................33 Table 3 NAMA’S NI DEBTORS, CHANGES IN LOAN VALUE .....................................34 Table 4 NAMA’S NI DEBTORS AND LOSSES INCURRED 2010-2014 ........................36 Table 5 NAMA PORTFOLIO SALES TO CERBERUS .................................................38 Table 6 LARGEST PURCHASERS OF NAMA ASSETS ..............................................38 Table 7 RECONCILIATION OF NAMA’S AND C&AG’S VALUATIONS ..........................48 Table 8 COMPARISON OF PIMCO PROPOSAL AND NAMA SALES PROCESS ..............52 Figure 1 PAR VALUE OF NI LOANS ...................................................................32 Figure 2 NAMA’S NI DEBTORS, OUTTURN AGAINST PAR VALUE...........................35 Figure 3 COLLATERAL FOR PROJECT EAGLE LOANS BY LOCATION .......................39 Figure 4 PURCHASER SHARE OF EUROPEAN REAL ESTATE LOANS .......................57 Figure 5 PARTICIPATION OF FIRMS IN PROJECT EAGLE SALES PROCESS .............58 4 PAC Report on NAMA’s Sale of Project Eagle CHAIRMAN’S PREFACE The focus of this report is the Committee of Public Accounts’ examination of the National Asset Management Agency’s (NAMA) sale of its Northern Ireland loan portfolio in 2014. The code name given to the sale was Project Eagle. The loan sale in question represented NAMA’s biggest transaction to that point. The sale was triggered by an approach from a major international investment firm although it was eventually bought by another firm, Cerberus Capital Management. The Comptroller and Auditor General (C&AG) carried out an examination of the actions of NAMA in relation to the sale, producing his own report which drew attention to, amongst other things, issues in relation to the valuation of the portfolio, the sales process and management of conflicts of interest. While the conclusions in the C&AG’s report would in any case merit considerable attention by the Committee, the fact that some of the contents have been so vigorously disputed by NAMA made closer examination by the Committee essential. In the course of its examination, the Committee heard 57 hours of oral evidence during the course of 11 meetings between 29 September 2016 and 14 December 2016 and received in the region of 3,000 pages of written evidence in relation to the matter. On behalf of the Committee, I would like to express my gratitude to everyone who participated in the hearings and also to those who provided detailed briefing in advance to assist the Committee in its deliberations. I would also like to express my appreciation to the Members of the Committee and the Secretariat for their work in relation to the Committee’s consideration of the issues and preparation of this report. I believe that this report is an important contribution to ensuring that public bodies are publicly accountable to the citizens of this country. I commend the Committee’s Report to Dáil Éireann. 5 PAC Report on NAMA’s Sale of Project Eagle __________________ Sean Fleming, TD Chairman Committee of Public Accounts March 2017 6 PAC Report on NAMA’s Sale of Project Eagle MAIN FACTS IN THIS REPORT A.1 In June 2014 the National Asset Management Agency (NAMA) sold its Northern Ireland (NI) portfolio of remaining loans in a single lot to Cerberus Capital Markets (Cerberus) for a final sales price of STG £1,137 million. The sale of the portfolio was code named Project Eagle. A.2 The Comptroller and Auditor General’s (C&AG’s) examination was carried out because of the size of the sale and the recorded loss associated with the Sale of Project Eagle. In his Special Report 94, published in September 2016, the C&AG criticised elements of NAMA’s performance in relation to the sale. A.3 The Committee of Public Accounts considered the C&AG report and held 11 meetings to examine the Sale of Project Eagle further. A.4 During its examination, the Committee was mindful that there are a number of other ongoing investigations in relation to Project Eagle, in Ireland and other jurisdictions, and sought not to prejudice any of these. A.5 NAMA was established to deal with a banking crisis in 2008/9. Its objective was to acquire eligible loans from five specific banks, hold and manage these loans and related collateral (mainly commercial property), and to then get the best financial return for the State by disposing of all those assets expeditiously. A.6 The par value of NAMA’s Northern Ireland (NI) Loan Portfolio at the time of acquisition in 2010/2011 was €5.38 billion. NAMA acquired these loans for €2.65 billion. NAMA’s overall losses on the NI Loan Portfolio were €800 million in the period 2010-2014. A.7 At the time of the Sale of Project Eagle, NAMA had 56 debtor connections in Northern Ireland and the loans were secured by 900 properties, only half of which, in value terms, were located in Northern Ireland. A.8 Following discussions between the then Minister for Finance and NI Minister for Finance and Personnel in 2009, NAMA established the Northern Ireland Advisory Committee (NIAC) to advise the NAMA Board in relation to the strategy for its Northern Ireland assets and its impact on the NI economy. The NIAC had 4 NAMA Board members and two external members, Mr Brian Rowntree and Mr Frank Cushnahan. A.9 Mr Cushnahan, during NIAC meetings in 2011 and 2012, disclosed that he was acting as a financial consultant to approximately 50% of the Northern Ireland debtors by value. 7 PAC Report on NAMA’s Sale of Project Eagle A.10 In late 2012 discussions took place between Brown Rudnick, an international law firm, and Tughans Solicitors in Belfast on the concept of a transaction allowing for NAMA to dispose of its entire NI loan portfolio. Brown Rudnick stated that Mr Cushnahan was involved in these discussions. A.11 Brown Rudnick also stated that, following its approach to the Pacific Investment Management Company (PIMCO), a meeting took place on 22 May 2013 to discuss PIMCO’s interest in NAMA’s NI loan portfolio. According to Brown Rudnick, the meeting involved Brown Rudnick, Tughans, Mr Frank Cushnahan and PIMCO with the then NI First Minister and NI Minister for Finance and Personnel. A.12 NAMA first became aware of interest in buying its NI loan portfolio on 4 July 2013 when it received (indirectly via the Department of Finance) a letter stating that Brown Rudnick had two clients interested in acquiring the whole NI loan portfolio. A.13 Subsequently, on 9 September 2013, NAMA received a letter from PIMCO expressing interest in purchasing the NI portfolio in a short and exclusive process. PIMCO indicated an interest in acquiring the portfolio for €1.1 billion. A.14 The NIAC was informed of the PIMCO approach at its meeting on 7 October 2013. No disclosures of interest were made by any member of the NIAC in relation to PIMCO at the meeting. A.15 On 10 October 2013, the NAMA Board discussed ‘Project Eagle’, the need for confidentiality because of political sensitivities, and the associated risks in relation to the execution of any sale. A.16 Although PIMCO had proposed that the portfolio would not be openly marketed, the Board agreed strongly that its clear policy was for open marketing. A.17 The Board agreed that PIMCO would be allowed access to a virtual data room to allow it to conduct due diligence in relation to a loan sale and that any final offer would be brought back to the Board for formal approval at a later date. A.18 In the following weeks PIMCO and their agents, Brown Rudnick and Tughans, were given access to the Project Eagle virtual data room. A.19 Mr Frank Cushnahan resigned from the NIAC in November 2013. A.20 On 4 December 2013, PIMCO submitted an indicative bid to NAMA for its NI loan portfolio of STG £1.1 to £1.3 billion subject to due diligence. 8 PAC Report on NAMA’s Sale of Project Eagle A.21 NAMA discussed the PIMCO offer in depth at its Board meeting of 12 December 2013. The Asset Recovery Section in NAMA presented a paper to the Board requesting guidance in relation to PIMCO’s request for exclusivity and approval to complete the sale of Project Eagle for a sum greater than STG £1.3 billion. A.22 The paper presented to the Board also drew attention to the time it would take to conduct an open market sales process. A.23 In terms of valuation of the Project Eagle portfolio, the paper relied heavily on cash flow projections as there was not a comprehensive set of recent valuations for the underlying property collateral. The cash flow projections, based on NAMA’s strategy at the time to dispose of NI debtor assets in smaller lots over the period up to 2020, showed scenarios created for net present value discount rates of 5.5% and 2.5%. A.24 The C&AG in his report stated that he believes the workout value of the loans presented at the December meeting underestimated the value by STG £189 million. He argued that the Board’s decision, in setting a minimum reserve price of STG £1.3 billion, involved a probable loss of up to STG £190 million. NAMA later recorded a loss of STG £162 million on Project Eagle following the sale. A.25 During hearings before the PAC, NAMA stated that a 10% discount rate would have been more appropriate for evaluating Project Eagle cash flows. However, a documented scenario using a 10% net present value discount rate in relation to Project Eagle was not presented to the Board. A.26 Contemporaneous notes of Board meetings and discussions were not retained. These may or may not have supported NAMA’s contentions in relation to a 10% or other net present value discount rates and how it arrived at its decisions in relation to progressing the sale. A.27 At the 12 December 2013 meeting, the Board agreed on a limited, focused and time-bound open market process with the Head of Asset Recovery to revert with a paper on such a process at the next meeting. The Board would then consider the matter of price. A.28 Although NAMA identified a number of risks in relation to the proposed Project Eagle Sale, it did not provide the Committee with details of a formal risk management process regarding these risks. A.29 The minutes of the meeting of 8 January 2014 states that the minimum reserve price of STG £1.3 billion was agreed at the NAMA Board meeting at its 12 9 PAC Report on NAMA’s Sale of Project Eagle December 2013 meeting. However, the minutes of the December meeting do not record that decision. A.30 The minutes of the 8 January 2014 meeting stated that NAMA’s own discounted cash flow was in the STG £1.2 to £1.3 billion range depending on the assumptions used. A.31 At the same meeting, NAMA agreed to appoint the firm Lazard as its loan sale advisor. It was agreed also that Lazard would approach at least two other major international investors and PIMCO was to be permitted to complete their due diligence on the rest of the portfolio. A.32 The minutes of the 8 January 2014 meeting also record that Lazard was to be advised in relation to the sale. A.33 It was also agreed that Asset Recovery would advise PIMCO of the intended marketing approach regarding involvement of other investors, partly to protect PIMCO’s interests with regard to the integrity of the disposal process. A.34 The Committee noted significant similarities between the PIMCO proposal and the sales process decided upon by NAMA, in respect of strategy, price and financial conditions. A.35 On 22 January 2014 Lazard presented to NAMA its understanding of NAMA’s objectives for the sales process, the process and a proposed timetable for the transaction including a list of credible bidders. A.36 On 13 February 2014, confidentiality in relation to the sale was lost when PIMCO’s approach to NAMA was reported in the media. A.37 NAMA has stated that increased flexibility was given to Lazard to increase the number of bidders as a result of the media leak. A.38 Following the media leak, 10 enquiries were received from firms wishing to join the sales process. 8 firms were refused access. Goldman Sachs and Fortress were the only two allowed to enter the process. A.39 Lazard wrote to NAMA on 20 February 2014 stating that the 6 firms then in the process would generate sufficient competition and that it did not intend to admit any further bidders. A.40 NAMA, through Lazard, notified the six firms of the bid price and a bid date of 18 March 2014. (However, this was subsequently extended to 25 March following a request from some of the companies.) Only Cerberus and Fortress stayed in the process to the end. 10 PAC Report on NAMA’s Sale of Project Eagle A.41 On 10 March PIMCO disclosed to NAMA a proposed success fee arrangement to be paid to Brown Rudnick, Tughans and former NIAC member, Mr Frank Cushnahan. A.42 At a subsequent NAMA Board meeting on 11 March 2014, the Board noted that Mr Cushnahan had not disclosed any conflicts of interest specific to PIMCO or Project Eagle. The Board also acknowledged that, because of his knowledge of NAMA’s NI strategy, Mr Cushnahan’s conflict of interest represented a significant reputational risk to NAMA. A.43 In light of the conflict of interest, the Board discussed whether PIMCO’s bid was “fatally flawed” given the perception that PIMCO might have benefitted from insider information. A.44 PIMCO in the following days revealed that the success fee was to be a payment of STG £16 million to be split equally among Brown Rudnick, Tughans and Frank Cushnahan. A.45 PIMCO withdrew from the sales process on 13 March 2014. A.46 NAMA did not contact Mr Cushnahan following PIMCO’s revelation in relation to his conflict of interest or obligations as a former member of the NIAC. A.47 NAMA did not inform its loan sale advisor Lazard of the reasons for PIMCO’s withdrawal. A.48 The Head of AR then advised the Board that, following PIMCO’s withdrawal, Fortress and Cerberus were the two remaining firms involved in the Sales process. A.49 At Cerberus’ and Fortress’ request, the closing date was extended two more times until 1 April 2014. A.50 A senior executive from Fortress met NAMA representatives on 25 March 2014, a week before the bid closing date of 1 April 2014. A.51 Department of Finance officials met representatives from Cerberus four days prior to the bid closing date. The Minister for Finance and NAMA senior personnel held separate meetings with senior Cerberus representatives on the eve of the closing bid date. A.52 On the 3 April 2014, Cerberus informed NAMA of a success fee arrangement involving Brown Rudnick and Tughans. Cerberus confirmed that no further sharing of the fee was to take place. 11 PAC Report on NAMA’s Sale of Project Eagle A.53 At its meeting of 3 April 2014, NAMA considered the bids from Cerberus and Fortress. As Cerberus was the lead bidder with a bid of STG £1,241 million, STG £11 million in excess of the revised bid price, the Board resolved to continue negotiating with Cerberus. A.54 The Sale of Project Eagle to Cerberus was completed in June 2014 for STG £1,137 million. This was STG £104 million less than the Cerberus’ bid price, as NAMA had sold a number of assets from the loan portfolio between the bid closing date and sale completion. A.55 During hearings of the Committee, Cerberus disclosed three breaches which Cerberus described as “three technical breaches” of a non-disclosure agreement with NAMA in relation to the sale, and that it, Cerberus, had not informed NAMA of its contracting of Brown Rudnick prior to the submission of its final bid. 12 PAC Report on NAMA’s Sale of Project Eagle GENERAL CONCLUSIONS AND REMARKS RELATED TO PUBLICATION OF REPORT B.1 The Committee notes the public level of disagreement between two important bodies, NAMA and the Office of the Comptroller & Auditor General (C&AG), in relation to C&AG’s Special Report 94 - National Asset Management Agency's sale of Project Eagle. B.2 The Committee is conscious of the difficult job that NAMA was given and that it was required to make important commercial decisions at a critical time in the State’s history. However, as a public body, there is an onus on NAMA to be fully accountable to the Houses of the Oireachtas for its actions, and adequate records are fundamental to ensuring accountability and transparency. The Committee noted a lack of clarity and appropriate detail, in records and documentation, in relation to Project Eagle decision-making. The Committee is of the opinion that this undermined NAMA’s efforts to satisfy the Committee that it had met its statutory obligations and achieved the best financial return for the State. B.3 Having considered the C&AG’s report, the Committee is of the opinion that the C&AG’s report was evidence-based, balanced and reasonable. B.4 The C&AG’s view of a probable loss of up to STG £190 million was based on his examination of NAMA’s own figures as documented and the C&AG stated he was not making a commercial evaluation in relation to that figure or the decision to sell its Northern Ireland portfolio in one lot. B.5 The Committee is satisfied that that there was no reference to the use of a 10% net present value discount rate in calculating the sales price in either NAMA’s Board Minutes or the papers presented at meetings of the Board at which the matter was considered. B.6 It is the view of the Committee that more care should be taken by NAMA and other public bodies to avoid the risk of a perception that preferential treatment is given to any particular firm engaged in the final stages of a bidding process for the purchase of assets owned by the State. This refers to the practice of arranging meetings with senior persons in the public body prior to a bid closing date. B.7 The Committee acknowledges that there is an obligation on NAMA to act expeditiously in relation to disposal of assets. Reduction of the associated debt was in the national financial interest. However, while there may have been a general pressure to deal with loan assets within a required time frame resulting from Ireland’s participation in a three year Troika programme, the Committee 13 PAC Report on NAMA’s Sale of Project Eagle notes that there was no specific pressure from the Troika to sell the Northern Ireland Loan Portfolio at or around the time of NAMA’s receipt of a proposal to do so. B.8 The Committee notes that Cerberus, subsequent to the purchase of Project Eagle, became the biggest purchaser of NAMA-secured loans. Up to 22 December 2016, Cerberus had purchased €14.4 billion, approximately 19% of the original par value of all NAMA loan assets. B.9 The Committee’s view is that the Sale of Project Eagle was marked by inadequate record keeping, weaknesses in relation to the management of conflicts of interest, a seriously deficient sales process and, ultimately, an inability by NAMA to demonstrate that it had obtained best value for money for the State. B.10 The Committee welcomes the proposed Commission of Investigation into NAMA's Sale of Project Eagle as already agreed in principle by the Taoiseach, party leaders and other Oireachtas representatives. It is the opinion of the Committee that the Commission should now proceed. 14 PAC Report on NAMA’s Sale of Project Eagle CONCLUSIONS ARRIVED AT IN BODY OF THE REPORT C.1 It is the opinion of the Committee that NAMA’s failure to effect Mr Frank Cushnahan’s removal from the Northern Ireland Advisory Committee (NIAC), following his disclosures in relation to consulting activities on behalf of a number of NAMA’s NI debtors, was a failure of corporate governance by NAMA. (Paragraph Section 48) C.2 It is the opinion of the Committee that receipt of the letter from Brown Rudnick in June 2013, proposing a sale with a supporting letter from the Northern Ireland Minister for Finance and Personnel: a) sought to influence NAMA’s view of such a proposal and b) sought to gain preferential access to a sales process for at least one firm with whom Brown Rudnick and others had a commercial relationship. (Paragraph Section 78) C.3 It is the opinion of the Committee that PIMCO’s proposal for an “exclusive sales process” created an obvious tension with the general Board policy of an open sale process. (Paragraph Section 79) C.4 The Committee is of the opinion that the paper presented to the NAMA Board by the Executive on 12 December 2013 appeared to favour a sales process that would not be fully open, and that the advantages of an open sales process were not adequately explained. In particular, the omission of an analysis in the paper dealing directly with the advantages (if any) of an open marketing sales process supports this view. (Paragraph Section 104) C.5 A number of what were presented as key challenges of an open marketing sales process during the 12 December 2013 meeting (including those cited in paragraph 103 of this report) are likely to have applied to the sales process eventually pursued by NAMA involving a limited number of bidders. (Paragraph Section 105) C.6 It is the opinion of the Committee that the discounted cash flow analysis presented by the Executive to the Board at the December 2013 meeting was for the purpose of presenting NAMA’s estimate of the workout value based on existing strategy, forecasts and projections at the time. (Paragraph Section 141) C.7 The absence of a comprehensive set of up to date valuations on the property associated with the loans, in the opinion of the Committee, created an overreliance on cash flow projections. (Paragraph Section 142) 15 PAC Report on NAMA’s Sale of Project Eagle C.8 The C&AG stated that he arrived at the figure of the probable loss of up to STG £190 million arising from his analysis of the cash flows projections that had been created by NAMA. He indicated, however, that that figure could have varied, up or down. It is the opinion of the Committee that a comprehensive set of up to date valuations on the property associated with the loans would have contributed to a more accurate assessment of any loss to be incurred by NAMA as a result of setting the minimum reserve price of STG £1.3 billion. (Paragraph Section 143) C.9 It is the opinion of the Committee that the NAMA Board was not explicitly informed of the extent of the financial loss that would be recorded in NAMA’s accounts as a result of setting the Project Eagle minimum reserve price of STG £1.3 billion. (Paragraph Section 144) C.10 It is the opinion of the Committee that PIMCO had probably taken the risks of buying the Project Eagle portfolio into account, by building in a discount to the bid it submitted to NAMA for the portfolio. (Paragraph Section 145) C.11 The minimum sales price of STG £1.3 billion set by NAMA is recorded, for the first time, in the January 2014 minutes. However, the January minutes state that the Board noted the minimum sales price of STG £1.3 billion was agreed in December 2013 though no such decision is recorded in the December minutes. It is the view of the Committee that such poor and inconsistent recording of important decisions is unsatisfactory. (Paragraph Section 146) C.12 The Committee acknowledges the statements from NAMA’s Board that it considered the valuation of the portfolio in the course of the 12 December 2013 meeting at a net present value discount rate of 10% (i.e. independently of the valuations/scenarios provided to it by the NAMA Executive). However, the Committee is satisfied that no documentation in relation to a 10% net present value discount rate was ever presented to the Board. (Paragraph Section 147) C.13 If NAMA's contention that an alternative net present value rate of 10% was appropriate for consideration in this case, it ignored its own guidance that “care be taken to ensure that a scenario for such an alternative rate be generated”. Documentary evidence only exists for scenarios of 2.5% and 5.5%. (Paragraph Section 148) C.14 Retention of the contemporaneous notes taken by NAMA at the Board meeting of 12 December 2013 would have greatly assisted NAMA in providing the Committee with a fuller understanding on how the Board arrived at their decisions, in particular in relation to NAMA’s valuation of the Project Eagle portfolio. (Paragraph Section 149) 16 PAC Report on NAMA’s Sale of Project Eagle C.15 Despite the identified risks associated with the PIMCO proposal and Project Eagle sales process, no evidence of a formal risk management process was provided by NAMA to the Committee in relation to risk monitoring, evaluation, or mitigation. Considering the unusual circumstances of the proposed sale, a more rigorous and well-documented risk management process would have been expected. (Paragraph Section 150) C.16 Having considered the valuation figures presented to the Board and the substantial similarity between PIMCO’s proposal to NAMA and the sales process pursued by NAMA, it is the view of the Committee that NAMA was influenced by the PIMCO proposal when deciding on the minimum reserve price, and key elements of the sales process. (Paragraph Section 151) C.17 It is the opinion of the Committee that given the high number of stakeholders together with the level of political interest involved and the size of the sale being considered, the loss of confidentiality in relation to Project Eagle was always a strong possibility. (Paragraph Section 175) C.18 Following loss of confidentiality, NAMA/Lazard refused entry to 8 of 10 firms expressing interest in joining the sales process. In doing so, it is the opinion of the Committee that NAMA demonstrated a commitment to PIMCO that marketing would be to a “limited number of potential investors”. (Paragraph Section 176) C.19 The Committee is of the opinion that the selection of initial potential investors to be invited to join the sales process did not include the most active participants in the market for non-performing European loans at that time. This opinion is supported further by the recorded efforts of firms such as Goldman Sachs and Fortress to become involved in the process as soon as the knowledge of the Sale of Project Eagle became public. The Committee notes that Fortress became one of the two final bidders for the portfolio. (Paragraph Section 177) C.20 NAMA stated that Mr Frank Cushnahan would be knowledgeable about NAMA’s strategy with respect to NI and his involvement with PIMCO raised “a significant reputational risk”. It is the opinion of the Committee that any real or perceived sharing of such knowledge with any bidder or their agents could have compromised the sales process. (Paragraph Section 193) C.21 The Committee notes from NAMA’s Board minutes that NAMA’s primary concern in relation to the alleged involvement of Mr Frank Cushnahan with PIMCO’s bid was in regards to “reputational risk” and “perception.” The Committee is of the view that any damage to NAMA’s reputation could have negative implications for other sales processes and it was appropriate to give the protection of its reputation serious consideration. The Committee would also have expected 17 PAC Report on NAMA’s Sale of Project Eagle ethical considerations to have been central to the Board’s deliberations in relation to this issue. This was not apparent. (Paragraph Section 194) C.22 When details of Mr Frank Cushnahan’s alleged relationship with Tughans, Brown Rudnick and PIMCO emerged, given that the NIAC External Members’ feedback had been taken into account by the Board when it considered the approach from PIMCO in October 2013, NAMA should have considered the extent, if any, to which the sales decision and process had been compromised. (Paragraph Section 195) C.23 When communications with PIMCO suggested that Mr Frank Cushnahan had involvement with PIMCO for a period while he may have been a NIAC member and in the period following his resignation from the NIAC, NAMA should have been more proactive in dealing with the matter. The Committee would have expected NAMA to make direct contact with Mr Cushnahan : a) to ask him to provide full details of the nature, substance and timing of his relationship with Tughans, Brown Rudnick and PIMCO b) to remind him of his obligations as a former NIAC member c) to advise him that the matter would be formally considered by the Board in relation to ethics legislation and that any further appropriate steps or referrals would take place. (Paragraph Section 196) C.24 The decision by NAMA not to inform Lazard, its loan sales advisor, of the reason’s for PIMCO’s withdrawal indicates limits to the role that Lazard was given in relation to the sales process. (Paragraph Section 197) C.25 It is the view of the Committee that the NAMA Board viewed the potential conflict of interest regarding Mr Cushnahan as a significant issue and that PIMCO left the process voluntarily mindful of their legal obligations. (Paragraph Section 198) C.26 The Committee notes that NAMA’s Chairman and CEO met the Cerberus Chairman the day prior to the bid closing date for Project Eagle. The Committee also notes that the Chairman has stated that Project Eagle was not discussed at that meeting. Nonetheless, the Committee is of the opinion that the Board should have been informed of the Cerberus meeting when the Board met on 3 April 2014, and agreed to sell Project Eagle to Cerberus. (Paragraph Section 210) C.27 The Committee considers that it was not appropriate for NAMA, as the contracting body, to meet with Cerberus representatives the day before the Project Eagle bid closing date. It could have given the perception that Cerberus was benefitting from preferential treatment. (Paragraph Section 211) 18 PAC Report on NAMA’s Sale of Project Eagle C.28 The Committee is further of the view that there was an inconsistency in NAMA’s treatment of a request for communications/meetings from different bidders that could be perceived as unfair. (Paragraph Section 212) C.29 The Committee considers that it was not procedurally appropriate for Department of Finance Officials to meet with Cerberus representatives in the days leading up to the Project Eagle bid closing date. This could have given the perception that Cerberus was benefitting from preferential treatment. (Paragraph Section 213) C.30 The Committee considers that it was not procedurally appropriate for the Minister for Finance to meet with senior Cerberus representatives the day before the Project Eagle bid closing date. This could have given the perception that Cerberus was benefitting from preferential treatment. (Paragraph Section 214) C.31 It is the Committee’s opinion that, with regard to Lazard’s limited role in the sales process and the fact that it did not have full access to information, the letter of comfort provided by Lazard to NAMA fails to provide assurance that the sales strategy followed by NAMA in relation to Project Eagle was the best one possible. (Paragraph Section 231) C.32 It is the view of the Committee that the sales strategy pursued by NAMA included restrictions of such significance that the strategy could be described as seriously deficient. It is, therefore, the opinion of the Committee that NAMA has been unable to demonstrate that by pursuing such a strategy that it got value for money for the Irish State in relation to the price achieved. (Paragraph Section 232) 19 PAC Report on NAMA’s Sale of Project Eagle SALE OF PROJECT EAGLE T IMELINE Table 1 Late 2012 TIMELINE Discussions between Brown Rudnick, Tughans Solicitors on concept of NAMA sale of NI portfolio 22 May 2013 Brown Rudnick, PIMCO, Tughans meeting with NI First Minister and NI Minister for Finance and Personnel to discuss NAMA sale of NI Portfolio 04 July 2013 NAMA receives first indication of interest in NI Portfolio 09 September 2013 NAMA receive an expression of interest from PIMCO in purchasing of NI Portfolio 07 October 2013 NAMA's NIAC informed of PIMCO approach 10 October 2013 NAMA Board discussed NI portfolio sale as "Project Eagle" and approve exploration of proposal Following weeks PIMCO and their agents, Brown Rudnick and Tughans given access to a Project Eagle virtual data room 04 December 2013 PIMCO submit indicative bid to NAMA of STG £1.1 to £1.3 billion 12 December 2013 NAMA Board discuss Project Eagle Sales Strategy 08 January 2014 Minimum reserve price of STG £1.3 billion set by NAMA Board, Lazard appointed as loan sale advisor Early February 2014 Selected firms approached by Lazard to join sales process 13 February 2014 Media report on PIMCO approach to NAMA: Confidentiality lost Following days Enquiries from 10 interested firms in relation to sale: only Goldman Sachs and Fortress allowed to enter sales process Bid price and bid closing date of 18 March 2014 communicated to six firms. (Bid closing date later extended) 10 March 2014 PIMCO disclose proposed success fee payable to Brown Rudnick, Tughans and former NIAC member 13 March 2014 Following discussion on success fee with NAMA, PIMCO withdraw from sales process 21 March 2014 Lazard confirm to NAMA that revised minimum reserve price of STG £1.23 billion had been communicated to Cerberus and Fortress 01 April 2014 Final bid closing date: Bids received from Fortress and Cerberus 03 April 2014 Cerberus inform NAMA of success fee arrangement with Brown Rudnick and Tughans 03 April 2014 NAMA Board approve Project Eagle Sale to Cerberus 20 June 2014 Sale completed with receipt of Cerberus payment 20 PAC Report on NAMA’s Sale of Project Eagle INTRODUCTION Note: Links to sources for paragraphed sections in this report are contained in Appendix 9 1. The Comptroller and Auditor General’s Special Report 94 - National Asset Management Agency's sale of Project Eagle is an examination of NAMA’s sale in June 2014 of a portfolio, code named Project Eagle, comprising all of the remaining loans of NAMA’s debtors based in Northern Ireland (NI). The eventual purchaser was Cerberus Capital Markets (Cerberus) and the price paid was STG £1,137 million. 2. The C&AG had signalled his intention to the Committee on 1 October 2015 to undertake a special interim report on Project Eagle. This was because of the size of the Project Eagle disposal and the scale of the loss incurred, relative to the amount paid by NAMA to acquire the loans. The report examined the circumstances that led to the loss. This loss was already public knowledge. 3. The C&AG’s report, which was presented to the Houses of the Oireachtas on 14 September 2016, focussed on assessing the performance by NAMA of its functions in relation to the sale. It presented key aspects of the sale examined by the C&AG, namely the financial outcome of the sale, the basis for NAMA’s decision to sell all its remaining Northern Ireland debtor loans in 2014, the loan sale process and the management of conflicts of interest. 4. The C&AG’s report drew a series of conclusions in respect of each area examined and states that the decision to sell the loans at a minimum price of STG £1.3 billion (later reduced because of sales of some of the loan assets in the interim) involved a significant probable loss of value to the State of up to STG £190 million in Net Present Value terms. 5. NAMA has disputed parts of the C&AG’s report, on the basis that NAMA considered that it contained unfair commentary, questioned NAMA’s competence and implied that it had failed its obligations to taxpayers under Section 10 of the National Asset Management Act 2009 (the NAMA Act). 21 PAC Report on NAMA’s Sale of Project Eagle 6. In the normal course of events, the Committee of Public Accounts carries out its own examination of the Comptroller and Auditor General’s reports. Given the importance of NAMA to the Irish economy and the significance of the issues in question, the Committee carried out an extensive series of hearings in relation to Project Eagle between 29 September and 14 December 2016 in order to examine further the matters raised. 7. Witnesses who gave oral evidence included the following:  The Chairman and Chief Executive Officer of NAMA, and other Senior NAMA Executives  Members of the NAMA Board at the time when the Sale of Project Eagle was under consideration  The Minister for Finance and a number of his officials  A former member of NAMA’s Northern Ireland Advisory Committee (NIAC)  The Deputy First Minister of Northern Ireland  The Chief Operating Officer of Cerberus Capital Management, the investment firm that bought Project Eagle  The Managing Director at Lazard, the firm which acted as a loan sales advisor to NAMA  The Comptroller and Auditor General and other senior staff members in his office 8. A key part of the Committee's work is to seek and obtain all the information and explanations it considers necessary when carrying out its examination of the Comptroller and Auditor General's report. This report details the Committee’s own conclusions based on the oral and documentary evidence provided to it. The Committee has agreed to forward a copy of this report to the Minister for Finance, the Department of Public Expenditure and Reform and to bodies listed in the next section which are examining or investigating matters in relation to the sale of Project Eagle. 9. The Committee expects that its conclusions will be considered in detail and appropriate steps taken by both NAMA and the Departments of Finance and Public 22 PAC Report on NAMA’s Sale of Project Eagle Expenditure and Reform so that they can carry out improvements where necessary. NOTE ON USE OF STERLING IN THIS REPORT The Sale of Project Eagle was carried out in Sterling and the Comptroller and Auditor General uses Sterling throughout his report to reflect that and to minimise confusion. In order to maintain consistency, Sterling is used in this document also, where appropriate. Appendix 8 provides an approximate Euro equivalent of key Sterling values related to the sale of Project Eagle. However, the Financial Summary on pages 32-36 is in Euros. 23 PAC Report on NAMA’s Sale of Project Eagle COMMITTEE’S ROLE AND ONGOING INVESTIGATIONS 10. The Committee’s authority to examine the C&AG’s report is derived from its terms of reference (see Appendix 4). 11. However, the Committee is always mindful to proceed in a manner which does not prejudice a related investigation by the appropriate authorities within the State or indeed anywhere else. 12. The Committee is aware that the sale of Project Eagle is the subject of ongoing investigations in a number of jurisdictions. a) NAMA made a complaint concerning a former NIAC member to the Standards in Public Office Commission (SIPO) on 2 March 2016 in relation to possible contraventions of Section 17 of the Ethics in Public Office Act 1995. b) NAMA made a complaint to An Garda Síochána on 9 September 2016 under Section 19 of the Criminal Justice Act 2011 concerning possible contraventions of the Prevention of Corruption Act 1906, the Public Bodies Corrupt Practices Act 1889 and the Prevention of Corruption (Amendment) Act 2001. c) NAMA made a further complaint to SIPO on 12 September 2016 concerning a former NIAC member and possible contraventions of Section 17 of the Ethics in Public Office Act 1995 d) The Committee has also received correspondence from the United Kingdom's National Crime Agency (NCA) confirming that it is investigating the sale of NAMA's Northern Ireland loan portfolio. It describes its investigations as complex, multi-jurisdictional and spanning events occurring over a lengthy time period. The Committee had been made aware, and this was later confirmed by Mr. Neporent, Chief Operating Officer, of Cerberus in his opening statement before the Committee, of two other ongoing investigations by: e) f) The United States’ Securities and Exchange Commission and The Department of Justice in the United States. g) Finally, a meeting between the Taoiseach, party leaders and other Oireachtas representatives took place in September 2016 at which a Commission of Investigation into NAMA’s sale of Project Eagle was agreed in principle. 24 PAC Report on NAMA’s Sale of Project Eagle BACKGROUND TO THE ESTABLISHMENT AND ROLE OF NAMA 13. The Government established the National Asset Management Agency (NAMA) as part of its response to a rapidly escalating banking crisis which emerged in the latter part of 2008 and early 2009. 14. The rationale for the establishment of NAMA was that during its lifetime it would acquire eligible loans, good and bad, from the commercial banks, hold and manage those loans and related collateral, mainly commercial property, and ultimately dispose of all those assets in a manner which obtained the best achievable financial return for the State. NAMA would then cease to exist. 15. NAMA was established as a statutory body corporate under the National Asset Management Agency Act 2009 (the NAMA Act) and its powers and functions derive from that Act. Among the principal objectives in establishing NAMA was to address a serious threat to the systemic stability of credit institutions in the State and to the economy generally. Under Section 10 of the Act, NAMA was given the role of acquiring eligible loans, good and bad, from five Irish banks. 16. Once the loans were acquired, the Act required NAMA to deal expeditiously with the assets while protecting and enhancing their value in the interests of the State. As already stated, NAMA is required, in so far as possible, to obtain the best achievable financial return for the State. In order to do so, it is expected to have regard to the cost to the Exchequer of acquiring and dealing with bank assets, its own cost of capital and other costs, and any other factor which NAMA considers relevant to the achievement of its purposes. 17. During his appearance before the Committee in relation to the sale of Project Eagle, the Minister for Finance, Michael Noonan, drew attention to the fact that European Commission and the European Central Bank (two of the three institutions that form “the Troika”) “were constantly urging that NAMA comply with the expeditious disposal of assets.” These assets had been acquired using money borrowed from the Troika at low interest rates. As the Troika wanted to be paid back as quickly as possible, NAMA was expected to work out the loan books quickly. 25 PAC Report on NAMA’s Sale of Project Eagle 18. In terms of this report, it is important to note that the NAMA Act prohibits NAMA from selling a property securing a bank asset acquired by NAMA to any debtor who is in default in relation to that asset. However, there is nothing in law to prevent a firm which has acquired loan assets from NAMA from doing so. 19. NAMA acquired over 15,000 loans at a cost of €31.8 billion from five banks (Allied Irish Banks, Anglo Irish Bank, Bank of Ireland, Irish Nationwide Building Society, EBS Building Society). The par value or face value of the loans and associated financial derivatives acquired was €74.4 billion. This crystallised losses for the banks of €42.6 billion or 57% of the amount owed by borrowers. The bulk of these losses was ultimately borne by the State. 20. NAMA’s senior debt at the end of 2016 stood at €2.59 billion and NAMA has stated that it remains on course, subject to market conditions, to pay back:  all senior debt (€30.2 billion) by end 2017; and  its subordinated debt (€1.6 billion) by 2020. 21. By the time it completes its work, NAMA expects to return €2.3 billion to the State over and above the €31.8 billion it paid for the loans (and administrative and financing costs). This amount of €2.3 billion is €40.3 billion less than the losses crystallised on the books of the five banks. 26 PAC Report on NAMA’s Sale of Project Eagle NAMA OVERSIGHT AND ACCOUNTABILITY ARRANGEMENTS 22. The NAMA Act makes the Agency accountable in a number of ways:  NAMA shall present a copy of its audited accounts to the Minister for Finance who shall lay them before the Houses of the Oireachtas.  The Chairman and Chief Executive shall whenever required give evidence to the Committee of Public Accounts on its accounts or special or other reports of the Comptroller and Auditor General (C&AG).  The Chief Executive Officer is the accountable person in appearing before the Committee of Public Accounts.  The C&AG is responsible for the audit of NAMA's annual financial statements. 23. Under Section 226 of the NAMA Act, every 3 years the C&AG assesses and reports on the extent to which NAMA has made progress towards achieving its overall objectives. The C&AG presents a copy of that report to the Minister for Finance which the Minister subsequently lays before the Houses of the Oireachtas. 24. In addition, Section 9 of the Comptroller and Auditor General (Amendment) Act, 1993, empowers the C&AG to carry out an examination of economy and efficiency in the use of resources and of the effectiveness of certain management systems, i.e. a value for money examination, in relation to any entity whose accounts are audited by him. Report 94 is such a report. ROLE OF THE MINISTER FOR FINANCE 25. A degree of oversight by the Minister for Finance (the Minister) is provided for in the Act. Under the Act, NAMA is required to comply with written directions of the Minister for Finance concerning the achievement of the purposes of the Act. However, NAMA is independent in the performance of its functions under this Act. 26. In addition to its annual accounts, NAMA is also required to submit to the Minister an Annual Statement setting out its proposed objectives for the following year, the scope of activities to be undertaken, its strategies and policies and its proposed use of resources. NAMA is also required to report to the Minister on a quarterly basis giving detailed information about its loans, its financing 27 PAC Report on NAMA’s Sale of Project Eagle arrangements and its income and expenditure. The Minister is obliged to lay such reports before the Houses of the Oireachtas. 27. Under Section 227 of the NAMA Act, the Minister may at any time, or at least every 5 years, require NAMA to report to him or her regarding progress towards achievement of its objectives. The Minister is required to lay a copy of that report before the Houses of the Oireachtas. The last such report was published in July 2014. NAMA COMMITTEES 28. In order to assist it in fulfilling its obligations, the NAMA Board established 6 Committees. 29. Under Section 32 of the NAMA Act, four statutory committees were established:  Audit Committee  Credit Committee  Risk Management Committee  Finance and Operating Committee 30. Under Section 33 of the NAMA Act two advisory Committees were established:  Planning Advisory Committee  Northern Ireland Advisory Committee (NIAC) (Dissolved in September 2014) NORTHERN IRELAND ADVISORY COMMITTEE (NIAC) 31. The role of the NAMA’s Northern Ireland Advisory Committee is important to this report in relation to possible conflicts of interest and the alleged relationship between a NIAC member, Mr Frank Cushnahan, and parties involved in the bidding process for Project Eagle. The details below regarding the NIAC and its membership have been provided by the Department of Finance and NAMA. 32. The former Minister for Finance, the late Brian Lenihan, and the Northern Ireland Minister for Finance and Personnel, Sammy Wilson MLA, agreed on the establishment of NAMA’s Northern Ireland Advisory Committee in September 2009. 28 PAC Report on NAMA’s Sale of Project Eagle 33. The purpose of the Committee was to advise the Board in relation to the strategy for dealing with Northern Ireland assets. 34. The NIAC was an advisory committee which did not have decision making powers. The Committee’s role was limited to advising NAMA on the impact of NAMA’s strategy on the Northern Ireland economy. 35. The NIAC had no role in relation to individual NAMA debtors or to the assets securing their loans. Discussions of debtor specific confidential information or particular assets was not permitted at NIAC meetings. NIAC MEMBERSHIP 36. The NAMA Act specifies that a committee established under Section 33(1) may include persons who are not members of the main NAMA Board, but the majority must be drawn from the Board. 37. The NIAC was established on 7 January 2010 with the appointment of four members from the main NAMA Board, and the Agency’s Head of Asset Recovery. 38. Under the NAMA Act, appointments to the NIAC were entirely a decision for the NAMA Board. Minister Lenihan received a number of representations regarding the appointment of the two external members of the NIAC. The Northern Ireland Minister for Finance and Personnel recommended three possible candidates to the Minister. One of these, Mr Frank Cushnahan, was invited to become a member of the NIAC. 39. Following an expression of interest in joining the main NAMA Board, Mr Brian Rowntree was recommended by the Office of the President of Ireland for the NIAC. 40. Following consultation with Minister Lenihan, the NAMA Board appointed Mr Cushnahan and Mr Rowntree to the NIAC and the Committee held its first meeting on 12 May 2010. 29 PAC Report on NAMA’s Sale of Project Eagle 41. The NIAC originally included the following members: Peter Stewart (Committee Chair, NAMA Board Member), Brian McEnery (NAMA Board member), Eilish Finan (NAMA Board member), Willie Soffe (NAMA Board member), Ronnie Hanna (NAMA Head of Asset Recovery), Frank Cushnahan (External member) and Brian Rowntree (External member). 42. Following the resignation of Peter Stewart from the Board of NAMA in October 2011 the NAMA Board appointed the NAMA Board Chairman, Frank Daly, as Chairman of the NIAC. 43. In June 2012 NAMA stated that it had reappointed Mr Frank Cushnahan and Mr Brian Rowntree to its Northern Ireland Advisory Committee (NIAC) for a further period of two years to 15 April 2014. 44. Mr. Frank Cushnahan resigned from the Committee in November 2013 and Ms Éilish Finan completed her term of office on the Board and the NIAC on 21 December 2013. 45. Following the Sale of Project Eagle, the NAMA Board resolved to dissolve the NIAC at its meeting of 8 September 2014. 30 PAC Report on NAMA’s Sale of Project Eagle NIAC EXTERNAL MEMBERS’ DECLARATIONS OF INTEREST 46. As a member of NIAC between 2011 and 2012, Mr Frank Cushnahan submitted 6 disclosures of interest. He disclosed that he was providing financial consultancy services, mainly on a non-fee basis to six NAMA NI debtors. These debtor connections accounted for approximately 50% by value of Project Eagle loans. The dates of the disclosures made are listed below: • • • • • 13 27 18 18 10 April 2011 June 2011 October 2011 June 2012 (two) December 2012 47. Mr Rowntree made 2 non-debtor related disclosures in 2012. Conclusions 48. It is the opinion of the Committee that NAMA’s failure to effect Mr Frank Cushnahan’s removal from the Northern Ireland Advisory Committee (NIAC), following his disclosures in relation to consulting activities on behalf of a number of NAMA’s NI debtors, was a failure of corporate governance by NAMA. 31 PAC Report on NAMA’s Sale of Project Eagle FINANCIAL SUMMARY OF ACQUISITION AND SALE OF NORTHERN IRELAND LOAN PORTFOLIO 49. The Financial Summary below seeks to give an accurate financial overview of the acquisition and sale of NAMA’s Northern Ireland Portfolio. ORIGINAL PAR VALUE OF BANK LOANS ACQUIRED BY NAMA Figure 1 50. When NAMA acquired its Northern Ireland debtors’ loans in 2010 and 2011, they had a total par value of €5.38 billion. By par value, almost half of the loans were acquired from Anglo Irish Bank (Anglo) and just under a third were from Bank of Ireland. See Figure 1. Irish Nationwide Building Society 2.8% (€0.18 billion))) 32 PAR VALUE OF NI LOANS Anglo 46% (€2.5 billion) Allied Irish Bank 21% (€1.1 billion) Bank of Ireland 30% (€1.6 billion) PAC Report on NAMA’s Sale of Project Eagle ACQUISITION PRICE PAID BY NAMA 51. NAMA valued the loans for acquisition using a loan valuation methodology agreed with the European Commission. The price paid, €2.65 billion, which included an uplift on collateral values in order to derive the loans’ long-term economic value, was 51% (€2.75 billion) lower than their par value of €5.38 billion (see Table 2 below). This resultant 51% discount was lower than the average discount of 57% for all loans acquired by NAMA. This €2.75 billion discount on the original par value of the loans, issued by the banks, was a cost ultimately borne by the State and by the shareholders of the participating financial institutions. This €2.75 billion loss was realised prior to the loans coming under NAMA’s control Table 2 NAMA’S NI DEBTORS, ACQUISITION VALUE OF LOANS Bank Note: Loan par value Discount applied Acquisition value €bn % €bn €bn Anglo 2.5 52% 1.3 1.2 Bank of Ireland 1.6 50% 0.8 0.8 Allied Irish Banks 1.1 43% 0.5 0.6 Irish Nationwide 0.18 86% 0.16 0.02 Total 5.38 51% 2.75 2.65 Figures above do not total exactly due to rounding. 33 PAC Report on NAMA’s Sale of Project Eagle MOVEMENT IN LOAN VALUES POST-ACQUISITION BY NAMA 52. Following acquisition by NAMA, the loan balances changed as interest was applied and debtors submitted disposal, rental and other non disposal income. In addition, there were changes due to fluctuations in the Euro/Sterling exchange rate. Overall, the loan balances decreased by €0.42 billion (excluding impairment charges) between acquisition and June 2014, prior to the Project Eagle Sale. The changes are summarised in Table 2. Table 3 NAMA’S NI DEBTORS, CHANGES IN LOAN VALUE From acquisition to June 2014 (excluding impairment) €bn Acquisition value €bn 2.65 Cash and non-cash movements Interest charged 0.35 Other (mainly foreign exchange differences) 0.18 Advances to debtors 0.07 Disposals (0.59) Rental and other non-disposal receipts (0.43) _________ Revised loan balances (0.42) _________ 2.23 Note: Excludes impairment charges 34 PAC Report on NAMA’s Sale of Project Eagle TRANSACTION PROCEEDS AND LOSSES INCURRED BY NAMA 53. Total loan sale proceeds from Project Eagle amounted to just over €1.43 billion, giving rise to a total loss incurred by NAMA on the loans of its Northern Ireland debtors of €0.8 billion. The loss comprised an impairment loss of €0.57 billion which had already been taken in NAMA’s financial statements up to end 2013, and a loss on disposal of €0.23 billion recognised in NAMA’s 2014 financial statements. TOTAL LOSSES MEASURED AGAINST PAR VALUE AT ACQUISITION 54. The loss of €2.75 billion realised by the four banks when NAMA acquired the loans combined with the loss of €0.8 billion incurred by NAMA through impairment and loss on disposal, resulted in total combined losses taken by the four banks amounting to €3.55 billion (approx. 66%) when measured against the par value of the loans at acquisition, adjusted for loan movements between 2010 and 2014. Figure 2 below shows the distribution of losses and proceeds. Figure 2 NAMA’S NI DEBTORS, OUTTURN AGAINST PAR VALUE 55. Totalling €5.55 billion, this comprises a par value of the loans at acquisition of €5.38 billion, plus the net loan movements, (excluding disposals) of €0.17 billion (see Table 2) between 2010 and 2014. Losses realised by the four banks of 50% (€2.75 billion) Disposal proceeds 36% (€2.0 billion) 35 Losses incurred by NAMA 14% (€0.8 billion) PAC Report on NAMA’s Sale of Project Eagle LOSSES INCURRED BY NAMA, 2010 TO 2014 56. €0.57 billion of the €0.8 billion losses had been incurred through impairment charges recognised in NAMA’s financial statements by the end of 2013 and the balance (€0.23 billion) was incurred on the loan sale disposals in NAMA’s 2014 financial statement. (See Table 4). Table 4 NAMA’S NI DEBTORS AND LOSSES INCURRED 2010-2014 €bn Loan balances before disposals Disposal proceeds 2.82 2010-2014 0.59 Project Eagle Loan Sale 1.43 Losses incurred by NAMA Of which €bn (2.02) 0.80 * €bn Note* 2010 Provision for losses 0.11 2011 Provision for losses 0.10 2012 Provision for losses 0.13 2013 Provision for losses 0.23 2014 Loss on disposal 0.23 Total loss 0.80 Figures are rounded. Consistent with its accounting policy, NAMA did not record impairment separately for its Northern Ireland debtors in 2010 other than for one specific major debtor. From 2011 onwards, 20 of the larger connections in the NI portfolio were managed by NAMA and were specifically provided for as part of the year-end impairment review. 36 PAC Report on NAMA’s Sale of Project Eagle CERBERUS: THE SUCCESSFUL BIDDER 57. In June 2014 Cerberus Capital Management (Cerberus), a private investment firm based in New York City, completed the purchase of NAMA’s Project Eagle which comprised the largest and remaining part of NAMA’s Northern Ireland loan portfolio. 58. Cerberus manages a multi-billion investment fund and invests globally across four main areas:  Distressed Assets and Securities  Private Equity  Middle Market Lending  Real Estate 59. Following what has been described as “a reverse inquiry” from the Pacific Investment Management Company (PIMCO), NAMA decided to initiate a sales process, codenamed Project Eagle, to dispose of its NI debtor portfolio. Project Eagle was NAMA’s largest proposed sale of a loan book in a single lot to that point. 60. NAMA invited Cerberus into its sales process for Project Eagle in the second week of February 2014. 61. Following a period in which Cerberus, along with other potential bidders, had access to a virtual data room, Cerberus submitted a bid to NAMA for Project Eagle. 62. One other bid was received, but as Cerberus’ bid was considered by the NAMA board to be stronger, it became the purchaser of Project Eagle. Its bid of STG £1,241 m was STG £11m (slightly less than 0.9%) in excess of the revised minimum reserve price set by NAMA. 63. Cerberus’ purchase of Project Eagle occurred in the same month as its purchase of Project Shift. Project Shift, a €0.15 billion sale, was a portfolio of German property assets held by a Northern Ireland debtor. The Sale of Project Shift had commenced prior to Project Eagle and after an open marketing process, Cerberus was the successful bidder. 37 PAC Report on NAMA’s Sale of Project Eagle 64. Cerberus made two other major purchases of NAMA loan assets in 2015 and 2016. Up to 22 December 2016, it had purchased €14.4 billion, approximately 19% of the total par debt of €74 billion associated with the assets acquired by NAMA). Cerberus’ purchases helped make it a major investor on the island of Ireland. A list of Cerberus purchases of NAMA loans is contained in the table below. Table 5 NAMA PORTFOLIO SALES TO CERBERUS Portfolio Name Date Sale Contracted Par Debt Project Shift June 2014 €0.15 billion Project Eagle June 2014 €5.40 billion Project Arrow December 2015 €6.20 billion Project Gem December 2016 €2.65 billion Total €14.40 billion 65. Cerberus is also the biggest purchaser of NAMA assets, having bought more than the next four largest purchasers combined. See the table below. Table 6 LARGEST PURCHASERS OF NAMA ASSETS Firm Par Debt Amount Cerberus €14.40 billion Oaktree €3.90 billion Deutsche Bank €2.45 billion Hammerson Allianz €2.40 billion Blackstone €1.80 billion 38 PAC Report on NAMA’s Sale of Project Eagle FOCUS ON PROJECT EAGLE 66. NAMA received a direct formal expression of interest in its Northern Ireland loan portfolio from the Pacific Investment Management Company (PIMCO), an American investment management firm, on 9 September 2013. 67. The Northern Ireland loan portfolio relates to loans held by Northern Ireland debtors. However, the underlying collateral included a considerable amount of property which was located outside of Northern Ireland as Figure 3 below shows. Figure 3 COLLATERAL FOR PROJECT EAGLE LOANS BY LOCATION Ireland (not Dublin), 6% Dublin , 1% Rest of world, 6% London, 4% Northern Ireland, 50% Great Britain (not London), 33% Source: NAMA. Note: Percentages are based on November 2009 property valuations. 68. The focus of the evidence considered relevant by the Committee is summarised below. It pertains to NAMA’s response to PIMCO’s expression of interest and the development and sale of the Northern Ireland loan portfolio under the title Project Eagle. EVENTS LEADING TO EXPRESSION OF INTEREST IN NAMA’S NI LOAN PORTFOLIO 69. Discussions took place from late 2012 between a Managing Partner in Tughans, a commercial law firm based in Belfast, and a Senior member in European Real Estate Practice in Brown Rudnick, an international law firm with offices in London and elsewhere. Discussions related to the concept of a transaction allowing for NAMA to dispose of its entire Northern Ireland loan portfolio in a single sale. Correspondence from Brown Rudnick states that Mr Frank Cushnahan, an external member of NAMA’s Northern Ireland Advisory Committee (NIAC) was involved in these discussions. 70. Following an approach from Brown Rudnick, PIMCO (and possibly one other unidentified firm approached by Brown Rudnick) and Brown Rudnick participated in a meeting on 22 May 2013 to discuss the idea of a NAMA Northern Ireland (NI) 39 PAC Report on NAMA’s Sale of Project Eagle portfolio sale with the then NI First Minister, Peter Robinson, and the then NI Finance and Personnel Minister, Sammy Wilson. Brown Rudnick stated that Tughans and Mr Frank Cushnahan were also present at the meeting. 71. NAMA has stated that it was not aware of any of these events at the time, or of any role allegedly played in the events by Mr Frank Cushnahan, a NIAC member, in the period leading up to PIMCO’s expression of interest in the Northern Ireland loan portfolio. 72. PIMCO stated in a letter to the Committee in 14 December 2016 that in June 2013 the Senior member in European Real Estate Practice in Brown Rudnick informed PIMCO that NAMA was "now in the loop" and had appointed a named individual to look after the transaction. However, this named individual wrote to NAMA on 20 December 2016 to the effect that he had not had any contact with PIMCO or Brown Rudnick before, during or after his term as a member of a NAMA (Ministerial) advisory group. He stated that he could offer no view on the reference made and that any suggestion that he had been appointed to look after the Project Eagle transaction was incorrect. 73. Brown Rudnick wrote to the then NI Finance and Personnel Minister, Sammy Wilson on 24 June 2013, stating that it was acting on clients’ behalf, and was seeking guidance before directly engaging with NAMA. The correspondence asserted that “two of the firm’s clients were interested in acquiring the whole loan book value, but one in particular was highly committed and would be well known to NAMA”. It further stated it was “vital” that one of the clients be given limited exclusive rights to proceed (i.e. initially by carrying out a proposed 4-week due diligence on the loan book) with the sale process. 74. The Brown Rudnick letter to the NI Finance and Personnel Minister also set out a number of tenets in relation to the management of the portfolio following a successful purchase. These included adoption of a long-term strategy, a release from personnel guarantees for cooperative borrowers, incumbent borrowers to continue in day to day operation and development of relevant assets and NI supply chains to be utilised as far as possible. 75. Minister Wilson wrote to the Minister for Finance, Michael Noonan, on the same day enclosing the letter from Brown Rudnick. Minister Wilson’s letter indicated that Brown Rudnick had introduced him to the two investors in question. 76. The Department of Finance forwarded letter from Minister Wilson to NAMA on 4 July 2013. 77. Subsequent to receiving Brown Rudnick’s correspondence, NAMA received a letter on 9 September 2013 from PIMCO expressing its non-binding indication of interest in the purchase of NAMA’s Northern Irish loan portfolio. This expression of interest 40 PAC Report on NAMA’s Sale of Project Eagle proposed a short and exclusive sales process. The minutes of the NAMA Board meeting of 12 September 2013 record that the Board was advised of PIMCO’s interest in acquiring the Northern Ireland portfolio for €1.1 billion (euros). The minutes of that meeting also recorded that “there is an issue about open marketing, and the Chairman advised that such an initiative is highly politically sensitive and should be treated as very confidential”. Conclusions 78. It is the opinion of the Committee that receipt of the letter from Brown Rudnick in June 2013, proposing a sale with a supporting letter from the Northern Ireland Minister for Finance and Personnel: a) b) sought to influence NAMA’s view of such a proposal and sought to gain preferential access to a sales process for at least one firm with whom Brown Rudnick and others had a commercial relationship. 79. It is the opinion of the Committee that PIMCO’s proposal for an “exclusive sales process” created an obvious tension with the general Board policy of an open sale process. EVENTS LEADING UP TO NAMA’S RECEIPT OF AN INDICATIVE BID 80. On 18 September 2013, Brown Rudnick’s Senior Member in European Real Estate Practice and PIMCO’s Senior Vice President of Real Estate Portfolio Management met with NAMA representatives regarding PIMCO’s interest in the transaction and possible logistics for executing such a transaction. 81. On 27 September 2013, the Minister for Finance, Michael Noonan, met the then NI First Minister, Peter Robinson, and the then NI Minister of Finance and Personnel, Simon Hamilton, in Stormont to discuss NAMA’s activity in Northern Ireland. An undated note of the 27 September 2013 meeting taken by the Principal Private Secretary to the First Minister of Northern Ireland recorded that Minister Noonan explained that, despite its commercial mandate, NAMA had a range of social obligations but it could not impose conditions on a buyer following the sale. Mr Noonan is also recorded as having “..indicated that whilst there could be no exclusivity clause there was in his view only one potential buyer. Mr Noonan undertook to discuss the situation with the CEO of NAMA and was confident that both administrations could work together with the potential buyer to overcome any difficulties.” 82. The Minister for Finance explained his view of the above note in the course of a reply to a parliamentary question on 3 October 2013. The Minister stated that the reference to “working together” meant that “both sides shared an understanding 41 PAC Report on NAMA’s Sale of Project Eagle of the importance of NAMA to the economy in Northern Ireland and the care needed in dealings in Northern Ireland regarding NAMA's management of the portfolio.” The Minister clarified that he did not intend to imply that his administration would work with PIMCO or any other potential buyers but that he “would have expressed confidence that NAMA would be able to work with potential buyers to overcome any difficulties and that [he] would have committed to maintaining an open dialogue between administrations to the extent that was helpful”. 83. After the meeting of 27 September 2013, the BBC reported that the Minister for Finance had indicated that the Government was re-examining how the NI economy could be helped by NAMA, to advance sales in a manner which drives the economy better. 84. The NIAC met on 7 October 2013. The minutes of that meeting record that the NIAC was advised of PIMCO’s approach of 9 September; that preliminary discussions had taken place; and that the Board of NAMA would consider the matter at its meeting on 10 October 2013 with a view to possible further engagement. The minutes of the NIAC meeting also record that the Chairman, Mr Frank Daly, “outlined what a NAMA sales process would entail with value and open marketing [being]key considerations for the Agency”. Discussion at the meeting included External Member feedback on the proposed approach to support the Board's consideration of the matter at its meeting on 10th October 2013. 85. The minutes of the NIAC meeting of 7 October 2013 record that the external members of the Committee, Mr Frank Cushnahan and Mr Brian Rowntree, had been in attendance; and that no disclosures of interest were made by any member of the Committee at that meeting. 86. The minutes record that the following views (not attributed to any particular member) were expressed: a) b) c) d) “The sale of a portfolio on such a scale could lead to strategic ‘land locking’ to guard against which, conditions ought to be attached although the Committee noted that this wouldn't be feasible; Such a sale would require value to be achieved by NAMA with transparency as a protection in this regard; The approach from PIMCO implies that value can be obtained from the portfolio, although the NI debtor portfolio also includes GB assets taken together the portfolio could be considered a ‘strategic purchase’; and A discount will be sought so the question of value is key for NAMA sell vs hold.” 87. The Board of NAMA met on 10 October 2013 and the minutes of the meeting refer to the NIAC External Members support for NAMA’s approach and its key considerations in terms of price and marketing. 42 PAC Report on NAMA’s Sale of Project Eagle 88. It was noted at the meeting that PIMCO’s interest was based upon its view that the NI market had bottomed out, the underlying value of the Great Britain assets held by NI debtors and the quantum of assets in the portfolio. 89. The NAMA Executive presented a paper to the Board in connection with the PIMCO proposal which outlined key risks as follows: a. b. c. “Reputational Risk: We should not underestimate how highly politically sensitive this proposal would be and the need for confidentiality is therefore crucial. Portfolio Definition Risk: This is not a discreet portfolio and as such we will need to exercise care with regard to debtor selection / exclusion Execution Risk: This proposal involves multiple counterparties and debtor cooperation will be important to ensure a successful outcome. Collation of a substantial amount of documentation /security items will be required to close out. The execution risk is heightened by the inevitable resource stretch and assumption that all debt is transferrable.” 90. In the Paper presented to the Board by the NAMA Executive, attention was drawn to the fact that PIMCO had proposed that the transaction would not be openly marketed. However, the Board agreed strongly that NAMA’s clear policy was that transactions occur via open marketing. 91. Also at the Board meeting, approval was sought by and granted to NAMA Asset Recovery to engage with PIMCO on the signing of an NDA (Nondisclosure Agreement) with NAMA. This was with a view to allowing PIMCO conduct “further due diligence towards the completion, ultimately, of an openly marketed Loan Sale in accordance with Board policy in respect of the Portfolio - the request for which will be brought back to Board for formal approval at a later date”. The Board also agreed that access to the virtual data room should be no less than that provided in any other loan sales process. 92. The Board noted that any final offer would be brought back to the Board for formal approval at a later date. 93. PIMCO signed an NDA on 16 October 2013 and was permitted access to the virtual data room thereafter. Such access provided PIMCO with “sufficient data that would enable it to prepare an informed bid based on the Top 55 assets”. 94. On 4 November 2013, Brown Rudnick and Tughans were granted access to the Project Eagle data room. This access was only available to entities that PIMCO specifically identified to NAMA as its advisors. NAMA’S CONSIDERATION OF THE PIMCO BID AND OF ALTERNATIVE SALES OPTIONS 95. On 4 December 2013, PIMCO submitted a bid to NAMA for its NI debtor loan portfolio. The bid was expressed in terms of a price range of STG £1.1 to £1.3 43 PAC Report on NAMA’s Sale of Project Eagle billion, with the final price to be determined after due diligence. PIMCO indicated that its preference remained that the sale would be a closed transaction. THE BOARD MEETING OF 12 DECEMBER 2013 96. The Board of NAMA met on 12 December and considered the PIMCO offer and matters arising. 97. The Executive-prepared paper presented to the Board of NAMA for its meeting of 12 December stated that a) “NAMA AR is seeking guidance from Board as to the appropriate response to grant exclusivity to PIMCO to enter into a closed transaction with no formal open marketing campaign of the Project Eagle portfolio of loans.” b) “Should Board authorise a closed market exclusive transaction with PIMCO or authorise the commencement of an open loan sale process NAMA AR seeks approval to complete the sale of Project Eagle for consideration greater than STG £1.3 billion (EUR €1.57 billion), subject to final transaction terms and conditions being approved by the Board in due course”. 98. The Paper presented to the Board was structured as follows: 1.0 Background and update 2.0 Open marketing vs. closed transaction 3.0 Price analysis 4.0 Work streams, key risks and timeframe 5.0 For consideration. Content of the Paper presented to the Board that appears material to the Committee’s examination of the sale is summarised and discussed in the paragraphs following. ANALYSIS OF PIMCO BID 99. The paper presented to the Board stated that PIMCO had carried out financial due diligence on the first 55 high worth assets and had placed a value of STG £950 million against these assets. The paper included two NAMA values for the same assets. The value of STG £891m was NAMA’s net disposal forecast in cash terms, STG £59m below PIMCO’s bid for the same assets. However, using a net present value discount rate of 5.5% a net present value of STG £766 was forecast, STG £184m below PIMCO’s bid for the same assets. 100. The paper also indicated that PIMCO had put forward a bid range of STG £150£350 million for a ‘tail’ of several hundred lower value assets, numbers 56 to 933. 44 PAC Report on NAMA’s Sale of Project Eagle The paper included two NAMA values for the same assets also. The value of STG £556m was NAMA’s net disposal forecast in real terms. However, using a net present value discount rate of 5.5%, a net present value of STG £478 was forecast. The two figures were both above PIMCO’s bid for the same assets. 101. As already stated, the total indicative bid from PIMCO was a range from STG £1.1 to £1.3 billion. MARKETING ISSUES 102. The introduction to the analysis in section 2 of the paper presented to the Board, Open marketing vs. closed transaction, included an analysis presented under the following three subheadings 1.2 Challenges of an open marketing sale process, 2.2 Advantages of a closed transaction, and 2.3 Risks of a closed sale 103. The challenges of an open market sales process listed indicated the need for a period of between 3 and 6 months to gather the underlying banking and property information and a further 6 weeks to carry out other preparatory work before an open marketing campaign could commence. Conclusions 104. The Committee is of the opinion that the paper presented to the NAMA Board by the Executive on 12 December 2013 appeared to favour a sales process that would not be fully open, and that the advantages of an open sales process were not adequately explained. In particular, the omission of an analysis in the paper dealing directly with the advantages (if any) of an open marketing sales process supports this view. 105. A number of what were presented as key challenges of an open marketing sales process during the 12 December 2013 meeting (including those cited in paragraph 103 of this report) are likely to have applied to the sales process eventually pursued by NAMA involving a limited number of bidders. PRICE ANALYSIS OF PROJECT EAGLE PORTFOLIO 106. The paper prepared by the NAMA Executive for the meeting on 12 December 2013 sought the Board’s approval to sell the Project Eagle portfolio for a sum “greater than STG £1.3 billion”. This was the minimum reserve price that was subsequently agreed by the Board at its meeting of 8 January 2014 45 PAC Report on NAMA’s Sale of Project Eagle 107. In terms of the underlying collateral or property assets, NAMA informed the Committee that, in relation to Project Eagle, NAMA had commissioned third party valuation advice in relation to 54%, by value of the portfolio since its acquisition, most of the valuation advice having been received in 2013. 108. The C&AG advised the Committee that prior to subsequent loan portfolio sales, NAMA obtained current market valuations of all the property assets from its loan sale advisers and that this did not happen in the case of Project Eagle. Therefore, as further noted by the C&AG, in assessing the loan sale portfolio proposal made by PIMCO, NAMA relied largely on its existing cash flow projections for valuing the assets. 109. NAMA’s strategy at the time was to dispose of Northern Ireland debtor assets individually or in smaller lots over the period up to 2020. In accordance with that strategy, all estimates of value presented in the paper presented to the Board on 12 December 2013, were based on the same projected cash flows for income and expenditure related to the individual assets. These cash flow projections included income from rent and the sale of assets over that period offset by expenditure such as maintenance and disposal costs. 110. The paper presented on 12 December 2013 includes several estimates of the value of the Project Eagle portfolio. Most of these estimates are set out in the paper presented to the Board under the heading ‘Price analysis’. 111. The variations in the range of estimates presented arose from differences in: a) assumptions as to when the cash flows would occur in the course of each year (the time of the year when NAMA would receive the money); b) Assumptions as to the actual value of the cash flows that would be realised by the sale of assets in future years as opposed to the projected value of those cash flows. Downward adjustments in the expected values are referred to as impairments; c) the net present value discount rate to be applied to the cash flow forecasts to calculate their net present value (NPV). 112. In June of 2013 the Board had agreed that a net present value discount rate of 5.5% to calculate the net present value of cash flow forecasts was “not unreasonable over NAMA’s projected lifespan to 2020”. However, the Board also recorded at the time that it is important that flexibility be maintained when evaluating potential transactions, and that care be taken to ensure that both (a) alternative net present value scenarios are generated using alternative net present value discount rates and (b) that qualitative information is considered as part of the decision-making process. 46 PAC Report on NAMA’s Sale of Project Eagle 113. The paper presented to the Board set out cash flow forecasts associated with the Project Eagle assets over the period 2014 to 2020 in accordance with NAMA’s strategy of working out the assets over that period. These forecasts provided the baseline figures for the further estimates of value presented in other tables provided to the Board. 114. The cash flow projections presented were discounted at both 5.5% and 2.5% to arrive at estimates of net present value of STG £1,381 million and STG £1,488 million respectively. It is to be noted that both estimates of net present value were above the minimum bid price of STG £1,300 million referred to in the NAMA Board minutes on 8 January 2014. 115. It is also to be noted that the position of the C&AG was that the analysis presented to the Board at the meeting of 12 December 2013 underestimated the workout value of the loans and that the correct valuation using NAMA’s standard net present value discount rate of 5.5% was STG £1,489 million. 116. In his report, the C&AG also raised concerns in relation to a number of the assumptions used by NAMA in arriving at the estimates of net present value as presented to the Board, viz. : a. All income was treated as received in December of each year. This was contrary to NAMA’s standard assumption that income should be evenly distributed across the year of receipt. Treating all cash flows as occurring in December had the net effect of reducing their undiscounted value by STG £39 million. b. NAMA impaired (reduced) the projected 2017 disposal receipts by STG £86 million in cash terms (STG £69 million in net present value terms). In his report, the C&AG stated that all impairment due to be recognised had been recognised, and that to make a further reduction would be excessive and not supported by the evidence. 117. The table below is a reconciliation of NAMA’s and the C&AG’s valuations of the projected work out cash flows. It takes NAMA’s valuation figure of STG £1,381 million (arrived at by applying the NAMA standard 5.5% net present value discount rate). This was the figure presented at the Board meeting. It adds back in the two figures which the C&AG had concerns about, mentioned above, to arrive at what the C&AG calculated as the correct valuation of STG £1,489 million using NAMA’s standard net present value discount rate. This is STG £189 million above the reserve price set by the NAMA Board and the basis for what the C&AG referred to as a probable loss of up to STG £190 million in his report. 47 PAC Report on NAMA’s Sale of Project Eagle Table 7 RECONCILIATION OF NAMA’S AND C&AG’S VALUATIONS Net Present Value £m NAMA valuation at 5.5% net present value discount rate (see Page 144 C&AG Report) (presented to Board 12 December 2013) Adjustment by C&AG for additional impairment not supported by evidence 1,381 69 1,450 Adjustment by C&AG for NAMA’s assumption of all receipts at year-end 39 C&AG valuation at 5.5% net present value discount rate 1,489 Minimum price set by NAMA Board 1,300 Difference 189 118. The other valuation presented to the Board using a net present value discount rate of 2.5%, if adjusted in the same manner by the C&AG as above, would have implied a loss of £285 million. 119. In evidence to the Committee, the CEO of NAMA accepted that NAMA recorded a loss of STG £162 million in its accounts on the Sale of Project Eagle. This was the recorded loss having exceeded the minimum reserve price by STG £11 million. 120. Had NAMA only obtained the minimum reserve price, the recorded loss would have been STG £173 million. 121. The C&AG stated that the figure of the loss of up to STG £190 million was based upon the cash flows projections that had been created by NAMA but indicated that that figure could vary, up or down. The C&AG stated that the best way to establish the loss of value would have been for a valuation of the underlying property assets to have been carried out in 2013 and 2014. As has already been stated (see paragraph section107) NAMA only had recent valuations for a proportion of the underlying assets. 48 PAC Report on NAMA’s Sale of Project Eagle 122. Minutes of the Board meeting of 12 December 2013 record that the Board requested the Head of Asset Recovery to revert to it with a paper on a sales process for its consideration within a week; and that the Board also agreed to consider the matter of price in conjunction with consideration of this sales process paper. 123. It should be noted, however, that the minutes of 8 January 2014 also state that, “as agreed at its 12th December meeting”, the Board noted it “would not consider the sale of Project Eagle portfolio of loans for a consideration less than STG £1.3 billion”. However, the minutes of the 12 December 2013 do not record this agreement. 124. Paragraph 3.1 of the December paper does state that “a party buying a nonperforming loan portfolio … is likely to discount the value of the underlying security by at least 10%”. This describes a discount applied by the purchaser to the purchaser’s estimate of the value of the property associated with a loan book. This discount could be intended to take account of matters such as the cost of financing the purchase, an element of profit and allowance for risk. Such a purchaser’s discount is likely to have been built into PIMCO’s bid. It is important to note that this discount is a discount from the purchaser’s perspective and should not be confused with the net present value discount rate or rates used by the owner of the asset to calculate its net present value to the owner, which principally reflects the owner’s cost of capital. 125. As has already been stated, the NAMA Act prohibits NAMA from selling a property securing a bank asset acquired by NAMA to any debtor who is in default in relation to that asset. However, there is nothing in law to prevent a firm which has acquired loan assets from NAMA from doing so. This may also form part of the difference in the value that a potential purchaser places on assets when compared with NAMA’s own valuation. 126. Both in oral evidence and in response to a draft of the C&AG’s report, NAMA stated that the discounted cash flow analysis in paper presented to the Board using on 12 December 2013, using net present value discount rates of 5.5% and 2.5% was not intended as representing a loan workout value. NAMA stated in oral evidence that it would have been appropriate to use a net present value discount rate of at least 10% in evaluating the Project Eagle cash flows to reflect all of the risks in the portfolio; and that, using this net present value discount rate, the maximum loan workout value would have been STG £1.36 billion in net present value terms. However, a documented scenario using a 10% net present value discount rate was not presented to the Board at the 12 December 2013 meeting. 127. In order to assess the extent of the discussion in relation to the most appropriate net present value discount rate, the Committee requested a copy of the 49 PAC Report on NAMA’s Sale of Project Eagle contemporaneous notes which were used to prepare the Board meeting minutes of 12 December 2013. NAMA informed the Committee that these had not been retained and that they serve no purpose other than to assist the Secretary in preparing the typed draft minutes for circulation to the Chairman and to Board members. RISK MANAGEMENT 128. At the 12 December 2013 meeting, the Board of NAMA noted that if NAMA was to “transact off market”, then “there was a potential reputational risk to the Agency in principle, and in relation to other NAMA debtors who might seek off market loan sales”. The Board also considered the view that an open market sale might provoke a hostile reaction in NI political circles. Following consideration of the issues, the Board (a) “agreed that a limited, focused and time bound open market process would be the best and prudent course of action”, (b) “requested that the Head of Asset Recovery to revert with a paper on such a process for its consideration within a week”, and (c) “agreed to consider the matter of price in conjunction with consideration of the above sales process paper.” 129. As the Board had discussed risks associated with the PIMCO proposal at both its 12 December 2013 meeting and its earlier meeting of 10 October 2013, the Committee requested a copy of the relevant extracts in the risk register associated with the Project Eagle sales process. NAMA’s response is recorded below : “The NAMA Risk Register comprises the range of risks which could have a potential impact on the Agency’s activities and the controls in place to manage those risks. The register includes strategic, economic, property, legal and operational risks, among others.” THE BOARD MEETING OF 8 JANUARY 2014 130. The minutes of the Board meeting of 8 January 2014 record that the Chairman noted contact by the Northern Ireland Executive Minister for Finance and Personnel who expressed his position “that any such process undertaken by NAMA should not be seen as publicly ‘auctioning’ the NI portfolio”. The Board also discussed the key priorities for NAMA as obtaining the optimum sale price and conducting an appropriate open sales process. 131. In relation to the sales process itself, the Chairman of NAMA noted that a key priority for NAMA was to have an open marketing approach that was “appropriate, 50 PAC Report on NAMA’s Sale of Project Eagle focused, time bound (given sensitivities & confidentiality concerns) while of course being sensitive to the NI position.” 132. The NAMA Board, when considering the PIMCO proposal, noted that NAMA’s own discounted valuation was in the STG £1.2 billion to STG £1.3 billion range, depending on the assumptions used, and agreed a minimum reserve price of STG £1.3 billion. This was in line with PIMCO’s indicative bid of STG £1.1 to £1.3 billion. 133. Although NAMA achieved in excess of the minimum reserve price on Project Eagle, in its accounts it recognised a loss of STG £162 million on the transaction. However, the Board minutes of the 8 January 2014 did not record that the achievement of the reserve price would result in a substantial recorded loss. 134. The Board agreed:       to appoint Lazard from the Loan Sale Advisory Services panel without running a mini tender because of “sensitivities.” that Lazard would advise NAMA “on the appropriate marketing approach, which will balance open market requirement with need for confidentiality”. that the likely approach would involve “approaching at least 2 other major international investors” and giving them “at least 2 weeks access to our data room to prepare an immediate bid”. in parallel, for PIMCO to be “permitted to complete their due diligence on the ‘tail’ of the portfolio and formalise their bid”. that Asset Recovery “would, at this juncture, meet with PIMCO to advise them of the intended approach regarding the other short-listed investors noting that this would be as much to protect PIMCO’s interests with regard to the integrity of the disposal process”. that Lazard would “submit a recommendation within an appropriate timeframe based on their recommendation on bid acceptance.” 135. The Committee notes that NAMA had run a tender process from September 2011 to 3 January 2012 to establish a panel of loan sale advisors. The firms wishing to join the panel had to meet normal procurement requirements. 136. The table below compares the PIMCO proposal with NAMA’s sales strategy in relation to the Sale of Project Eagle. 51 PAC Report on NAMA’s Sale of Project Eagle Table 8 COMPARISON OF PIMCO PROPOSAL AND NAMA SALES PROCESS PIMCO PROPOSAL NAMA SALES PROCESS Sales Strategy All NI debtor loans to be sold in one loan sale All NI debtor loans to be sold in one loan sale Sales Price STG £1.1 to £1.3 billion indicative bid STG 1.3 billion minimum bid price Sales process Short and Exclusive Process limited, focused and time bound At least two other bidders to be invited Financial conditions Cash offer Cash only 137. The minutes later record the Board’s decision that “Lazard was to be fully briefed in relation to the sensitivities and utmost confidentiality required in relation to the sale and was to only approach Parties with the capability/ interest to purchase the portfolio”. Lazard was also to be given “a reasonable time to market the portfolio”. 138. Lazard was provided with a verbal briefing on 13 January 2014 having originally signed a non-disclosure agreement (NDA) on 9 January 2014. NAMA’s evidence to the Committee was that it did not have any briefing document or minutes of this initial briefing. 139. The minutes also state that “PIMCO would be sensitive to becoming price setters”. 140. NAMA’s Sale of Project Eagle was to be carried out in a single stage. However, the C&AG drew attention to the fact that a two-stage bidding process was standard in other such sales. The Committee notes that a two stage process could have allowed for a greater number of bidders to be approached. These bidders would be provided “with the opportunity to carry out initial pricing analysis and to establish their interest in a portfolio without committing to the more expensive full due diligence process which is carried out in the second stage.” 52 PAC Report on NAMA’s Sale of Project Eagle Conclusions 141. It is the opinion of the Committee that the discounted cash flow analysis presented by the Executive to the Board at the December 2013 meeting was for the purpose of presenting NAMA’s estimate of the workout value based on existing strategy, forecasts and projections at the time. 142. The absence of a comprehensive set of up to date valuations on the property associated with the loans, in the opinion of the Committee, created an overreliance on cash flow projections. 143. The C&AG stated that he arrived at the figure of the probable loss of up to STG £190 million arising from his analysis of the cash flows projections that had been created by NAMA. He indicated, however, that that figure could have varied, up or down. It is the opinion of the Committee that a comprehensive set of up to date valuations on the property associated with the loans would have contributed to a more accurate assessment of any loss to be incurred by NAMA as a result of setting the minimum reserve price of STG £1.3 billion. 144. It is the opinion of the Committee that the NAMA Board was not explicitly informed of the extent of the financial loss that would be recorded in NAMA’s accounts as a result of setting the Project Eagle minimum reserve price of STG £1.3 billion. 145. It is the opinion of the Committee that PIMCO had probably taken the risks of buying the Project Eagle portfolio into account, by building in a discount to the bid it submitted to NAMA for the portfolio. 146. The minimum sales price of STG £1.3 billion set by NAMA is recorded, for the first time, in the January 2014 minutes. However, the January minutes state that the Board noted the minimum sales price of STG £1.3 billion was agreed in December 2013 though no such decision is recorded in the December minutes. It is the view of the Committee that such poor and inconsistent recording of important decisions is unsatisfactory. 147. The Committee acknowledges the statements from NAMA’s Board that it considered the valuation of the portfolio in the course of the 12 December 2013 meeting at a net present value discount rate of 10% (i.e. independently of the valuations/scenarios provided to it by the NAMA Executive). However, the Committee is satisfied that no documentation in relation to a 10% net present value discount rate was ever presented to the Board. 53 PAC Report on NAMA’s Sale of Project Eagle 148. If NAMA's contention that an alternative net present value rate of 10% was appropriate for consideration in this case, it ignored its own guidance that “care be taken to ensure that a scenario for such an alternative rate be generated”. Documentary evidence only exists for scenarios of 2.5% and 5.5%. 149. Retention of the contemporaneous notes taken by NAMA at the Board meeting of 12 December 2013 would have greatly assisted NAMA in providing the Committee with a fuller understanding on how the Board arrived at their decisions, in particular in relation to NAMA’s valuation of the Project Eagle portfolio. 150. Despite the identified risks associated with the PIMCO proposal and Project Eagle sales process, no evidence of a formal risk management process was provided by NAMA to the Committee in relation to risk monitoring, evaluation, or mitigation. Considering the unusual circumstances of the proposed sale, a more rigorous and well-documented risk management process would have been expected. 151. Having considered the valuation figures presented to the Board and the substantial similarity between PIMCO’s proposal to NAMA and the sales process pursued by NAMA, it is the view of the Committee that NAMA was influenced by the PIMCO proposal when deciding on the minimum reserve price, and key elements of the sales process. THE BOARD MEETING OF 16 JANUARY 2014 152. The Board met on 16 January 2014. The minutes of the meeting record that, “after considerable discussion, the Board agreed that PIMCO should be advised, post Lazard’s appointment, of the intended approach regarding marketing to a limited number of potential investors”; and that it would convene the following week, if required, to discuss Lazard’s proposal. 153. Evidence made available indicates that the Board did not meet again until 13 February 2013 to discuss Project Eagle. LAZARD AS LOAN SALE ADVISOR 154. On 21 January 2014, Lazard was granted access to the NAMA Project Eagle virtual data room that was previously made available to PIMCO. This provided Lazard with information on the composition of the Project Eagle portfolio. 155. At a meeting with NAMA on 22 January, Lazard gave a presentation (its ‘Pitch Book’) which summarised its understanding of the assignment and of NAMA’s 54 PAC Report on NAMA’s Sale of Project Eagle objectives, provided a high-level breakdown of the portfolio, described the proposed sales and transaction processes, outlined a proposed timetable for the transaction and proposed a list of suitable, credible bidders. The Pitch Book stated that the sales process should maintain competitive tension and allow for maximum ‘price discovery’ without jeopardising the requirement for confidentiality; and that other bidders would need to have sufficient time and information to submit offers for the portfolio that could be compared to PIMCO’s. Lazard emphasised “that the overriding objective is to maximise the recovery for the Irish taxpayer”.1 156. On the question of whether NAMA provided a written brief to Lazard, NAMA’s evidence was that the brief was the decision of the Board in January 2014 to approach Lazard to appoint it as loan sales adviser within the parameters set by the Board. 157. Evidence from NAMA is that Lazard’s document of 22 January 2014 was subject to change, arising from consultation between NAMA and Lazard, in relation to the firms to be invited into the sales process. With regards to an initial shortlist and a reserve list that had been put together by Lazard, Oaktree was promoted to the initial shortlist and Cerberus was switched to the reserve list. 158. Following the consultation mentioned above, Lazard invited three investment firms to join the sales process in late January/early February 2014. These were Blackstone, Starwood and Oaktree. Only Oaktree agreed to join the process. 159. Following this, Lazard then approached three other potential bidders, two of whom, Cerberus and Loan Star, joined the process. By 13 February there were four potential bidders involved in the sales process- PIMCO, Oaktree, Cerberus and Loan Star. MEDIA REPORT ON SALE OF NORTHERN IRELAND PORTFOLIO ON 13 FEBRUARY 2014 160. PIMCO’s approach to NAMA was reported in the media on 13 February 2014. Reports suggested that PIMCO was “understood to have made it known to senior politicians in the North in recent months that it was interested in acquiring outright Nama’s northern portfolio”. THE BOARD MEETING OF 13 FEBRUARY 2014 161. At the NAMA Board meeting of 13 February 2014, the Board noted the list of potential bidders recommended by Lazard and progress towards inviting participation into the sales process. 1 This document has been seen by the Committee. However, by agreement of the Committee, it has not been made publicly available because of commercial sensitivity. 55 PAC Report on NAMA’s Sale of Project Eagle 162. The Board agreed an exception to Loan Policy wherein the data room would contain redacted November 2009 valuations for the Top 55 properties (85% by value) and full valuations for the balance of 800 properties (15% by value). Noting that it was not possible for potential purchasers to approach debtors, this was decided on the basis of the unique circumstances of the potential loan sale. It was also decided to give AR/Lazard flexibility to increase the number of bidders involved in the process if genuine, credible interest arose. 163. In response to the Committee on the media leaks NAMA stated in writing to the Committee “When a press report on the Project Eagle sale process appeared on 13 February 2014, the transaction became public. The NAMA Board considered the position at its Board meeting of 13 February 2014 and, recognising that the confidentiality requirement was no longer relevant, approved that Lazard would be given the “flexibility to increase the number of bidders involved in the process if genuine, credible interest arose”. However, the reason why flexibility was granted to Lazard was not recorded in the minutes. EVENTS FOLLOWING MEDIA REPORTS 164. On the same day (13 February 2014), Fortress made contact with the Taoiseach’s Office and with the CEO of NAMA and indicated their interest in becoming involved in the sales process. 165. Also on the same day, Goldman Sachs contacted NAMA and expressed that company’s interest in participating in “any process that seeks to maximise proceeds for NAMA and the State “. 166. Following the media coverage in relation to PIMCO’s approach to NAMA, there were a total of ten enquiries received from firms interested in joining the sales process, Goldman Sachs and Fortress being the only two allowed to enter the process. Lazard informed NAMA that it had excluded the other eight firms, seven of whom it said were well known to Lazard and had excellent reputations. On 20 February 2014, Lazard wrote to NAMA stating that it believed that the six bidders then in the process would generate sufficient competition and, therefore, it did not intend to admit any further bidders. 167. On 14 February 2014, Apollo wrote to NAMA by email notifying it of its withdrawal from the process. (It had signed a non-disclosure agreement on 11 February 2014 but did not carry out an examination of documentation). Following the media reports, Apollo noted its disappointment to learn of the extensive discussions with PIMCO in advance of the start of the process. It stated that it believed that this created a very material advantage for that party. It also indicated that it was not in a position to commit resources to the process under the stipulated guidelines and timeline. 56 PAC Report on NAMA’s Sale of Project Eagle 168. A date of 18 March 2014 for submission of bids was notified by Lazard to interested parties. 169. NAMA informed the Committee that the bid price was communicated verbally by Lazard during February 2014 to all 6 companies which had signed a Nondisclosure agreement and remained involved in the process. These were:       Oaktree PIMCO Cerberus Lone Star Goldman Sachs Fortress NAMA has not been able to provide details on exact time or dates, stating it did not have access to Lazard’s records. 170. The table below indicates the percentage by purchaser of all European commercial real estate loans of €1 billion (par value) for the years 2012-2014. It is to be noted that the initial shortlist of 3 potential investors (Blackstone, Starwood and Oaktree), in addition to PIMCO, that were invited by NAMA/Lazard into the sales process accounted for no more than 4% of purchases of non-performing loan (NPL) portfolios in any of the years 2012-2014 . Indeed in the two years prior to the sale of the portfolio, 2012 and 2013, they accounted for 0% of NPL purchases. Figure 4 PURCHASER SHARE OF EUROPEAN REAL ESTATE LOANS 171. Lazard stated that in selecting investors to participate in the sales process, they applied their professional judgement. When asked during their appearance before the Committee about why they had not included Fortress in the initial list, they responded that “We produced a long list of bidders which was contained in our presentation dated 22 January 2014 and Fortress was on that list. We then selected seven bidders and put them into tier one and tier two, and we identified 57 PAC Report on NAMA’s Sale of Project Eagle those bidders based on NAMA’s criteria in terms of appetite, expertise, resources and so on. When Fortress eventually made an approach, we admitted it to the process.” 172. On 4 March 2014, Lazard informed NAMA that a number of interested parties were seeking an extension of time for the bid date, in light of the amount of legal due diligence to be completed following the opening of the Virtual Data Room and recommended such an extension. On 4 March 2014, Lazard was advised that NAMA was agreeable to an extension, with the revised bid date extended from 18 March 2014 to 25 March 2014. 173. NAMA has confirmed that it contacted Lazard on 20 March 2014 and requested that they communicate a revised reserve bid price to the remaining two potential bidders (Cerberus and Fortress). Lazard confirmed by email on 21 March 2014 that this had happened. NAMA has stated that they do not have access to Lazard’s correspondence but has no doubt the revised reserve price was communicated. 174. The periods for which the various firms were involved in the process are illustrated in the following figure: Figure 5 PARTICIPATION OF FIRMS IN PROJECT EAGLE SALES PROCESS t Note: Although Apollo signed a non-disclosure agreement, it did not proceed further in the process. 58 PAC Report on NAMA’s Sale of Project Eagle Conclusions 175. It is the opinion of the Committee that given the high number of stakeholders together with the level of political interest involved and the size of the sale being considered, the loss of confidentiality in relation to Project Eagle was always a strong possibility. 176. Following loss of confidentiality, NAMA/Lazard refused entry to 8 of 10 firms expressing interest in joining the sales process. In doing so, it is the opinion of the Committee that NAMA demonstrated a commitment to PIMCO that marketing would be to a “limited number of potential investors”. 177. The Committee is of the opinion that the selection of initial potential investors to be invited to join the sales process did not include the most active participants in the market for non-performing European loans at that time. This opinion is supported further by the recorded efforts of firms such as Goldman Sachs and Fortress to become involved in the process as soon as the knowledge of the Sale of Project Eagle became public. The Committee notes that Fortress became one of the two final bidders for the portfolio. NAMA’S ACTIONS FOLLOWING DISCLOSURE OF SUCCESS FEE ARRANGEMENTS BY PIMCO 178. On 10 March 2014 PIMCO disclosed to NAMA information regarding a success fee arrangement or proposed arrangement involving Brown Rudnick, Tughans and former NIAC member Mr Frank Cushnahan. Correspondence from PIMCO and Brown Rudnick stated that discussions in relation to payment of success fees had taken place between these two companies at various times over a period of months leading up to PIMCO’s disclosure to NAMA. Brown Rudnick also stated that the discussions included the name of former NIAC member, Mr Frank Cushnahan. It appears that the discussions on fee arrangements which took place between PIMCO and Brown Rudnick in February 2014 dealt with, in part at least, the option of an alternative proposal of payment to Mr Cushnahan of an asset management fee by PIMCO post-closing of the sale as opposed to a success fee. Brown Rudnick’s evidence states that no agreement in principle was ever reached regarding the proposal. 179. NAMA stated that it first became aware of the involvement of Mr Frank Cushnahan with the potential bidder side as a result of PIMCO’s disclosure on 10 March 2014. THE BOARD MEETING OF 11 MARCH 2014 180. The Board met again on 11 March 2014, the background for the meeting being recorded as “a potential issue which had arisen in relation to Project Eagle during a conference call between the Head of Asset Recovery and Senior Divisional 59 PAC Report on NAMA’s Sale of Project Eagle Manager, NAMA Legal and Legal Counsel for PIMCO which had taken place on Monday 10th March 2014”. 181. The Board noted that Mr Cushnahan had not disclosed any conflicts of interest specific to Project Eagle/PIMCO during his membership of the NIAC or since his resignation from the NIAC on 8 November 2013. While the Board acknowledged that although members of the Northern Ireland Advisory Committee had no access to confidential debtor specific information, Mr Cushnahan, “would be knowledgeable about NAMA’s strategy with respect to NI and noted that the involvement of Frank Cushnahan with PIMCO raised a significant reputational risk to NAMA.” 182. The Board also noted that there were some reservations in relation to a success fee being paid to Tughans in light of the co-location of offices between Mr Cushnahan and Tughans Solicitors. 183. The Board discussed whether PIMCO’s bid was “fatally flawed given the potential perception that PIMCO might have benefitted from insider information as a result of Frank Cushnahan’s involvement.” 184. The Board agreed that the success fee arrangement represented a significant issue for NAMA and the Head of Asset Recovery undertook to advise PIMCO of the Board’s view of the matter. 185. Following the Board meeting, the Head of Asset Recovery informed that the proposed success fee arrangement “was considered by the NAMA Board to be a very serious issue.” While “other options” were discussed, PIMCO, having already raised the matter of the potential conflict of interest with NAMA advised NAMA that “it had no option but to leave the process” and did so of its own volition. THE BOARD MEETING OF 13 MARCH 2014 185. At the NAMA Board meeting of 13 March 2014, the proposed success fee was discussed again. The minutes record that as NAMA had not acquiesced to the success fee arrangements, PIMCO felt obliged to withdraw. 186. PIMCO had revealed that the success fee arrangement had involved a potential payment of STG £16 million to be split equally three ways between Brown Rudnick, Tughans and Mr Cushnahan. The minutes record that, “the Board noted that PIMCO had advised that the negotiations had commenced in April 2013 and noted further that Frank Cushnahan had not resigned as a member of the Northern Ireland Advisory Committee until 7 November 2013 nor had he made any disclosure of his involvement.” 187. Notification of PIMCO’s withdrawal was received in writing on the 13 March 2014. 60 PAC Report on NAMA’s Sale of Project Eagle 188. The Deputy Head of Asset Recovery advised that, following the withdrawal of PIMCO from the bidding process, two bidders remained in the sales process for Project Eagle. However, the minutes also record that the Board was informed that, “based on indications arising from their limited data room activity Fortress appeared to be less actively engaged in the process than Cerberus to date.” THE SALES PROCESS AFTER PIMCO SUCCESS FEE DISCLOSURE 189. The Chairman of NAMA informed the Minister for Finance on 13 March 2014 of PIMCO’s withdrawal from the sales process and the reasons for it. NAMA has explained that its Chairman is in regular contact with the Minister and keeps him informed of all major developments regarding NAMA. 190. NAMA did not inform Lazard of the details of the difficulties that came to light in March 2014 that led to PIMCO’s withdrawal from the process. 191. The note of a conference call between NAMA and PIMCO on 12 March 2014 prepared by NAMA’s Senior Divisional Manager of Legal Affairs shows that there was agreement between PIMCO and NAMA that they should adopt an agreed approach to communications regarding PIMCO’s withdrawal from the sales process. 192. The note also indicated that, in NAMA Legal’s opinion, NAMA had no reporting obligations in regard to Lazard and there was “no need to take positive action”. However, when appearing before the Committee, Mr Patrick Long, Managing Director at Lazard, agreed that it would have been valuable to have been advised of the relationship between PIMCO, Brown Rudnick Tughans and Frank Cushnahan; and of Frank Cushnahan’s association with NAMA NI debtors. Conclusions 193. NAMA stated that Mr Frank Cushnahan would be knowledgeable about NAMA’s strategy with respect to NI and his involvement with PIMCO raised “a significant reputational risk”. It is the opinion of the Committee that any real or perceived sharing of such knowledge with any bidder or their agents could have compromised the sales process. 194. The Committee notes from NAMA’s Board minutes that NAMA’s primary concern in relation to the alleged involvement of Mr Frank Cushnahan with PIMCO’s bid was in regards to “reputational risk” and “perception.” The Committee is of the view that any damage to NAMA’s reputation could have negative implications for other sales processes and it was appropriate to give the protection of its reputation serious consideration. The Committee would also have expected 61 PAC Report on NAMA’s Sale of Project Eagle ethical considerations to have been central to the Board’s deliberations in relation to this issue. This was not apparent. 195. When details of Mr Frank Cushnahan’s alleged relationship with Tughans, Brown Rudnick and PIMCO emerged, given that the NIAC External Members’ feedback had been taken into account by the Board when it considered the approach from PIMCO in October 2013, NAMA should have considered the extent, if any, to which the sales decision and process had been compromised. 196. When communications with PIMCO suggested that Mr Frank Cushnahan had involvement with PIMCO for a period while he may have been a NIAC member and in the period following his resignation from the NIAC, NAMA should have been more proactive in dealing with the matter. The Committee would have expected NAMA to make direct contact with Mr Cushnahan : a) b) c) to ask him to provide full details of the nature, substance and timing of his relationship with Tughans, Brown Rudnick and PIMCO to remind him of his obligations as a former NIAC member to advise him that the matter would be formally considered by the Board in relation to ethics legislation and that any further appropriate steps or referrals would take place. 197. The decision by NAMA not to inform Lazard, its loan sales advisor, of the reason’s for PIMCO’s withdrawal indicates limits to the role that Lazard was given in relation to the sales process. 198. It is the view of the Committee that the NAMA Board viewed the potential conflict of interest regarding Mr Cushnahan as a significant issue and that PIMCO left the process voluntarily mindful of their legal obligations. REMAINING BIDDERS: CERBERUS AND FORTRESS 199. On 14 March 2014, Lazard contacted NAMA, outlining that both Fortress and Cerberus had sought a further extension to the revised 25 March 2014 bid date, with Lazard recommending that such an extension be granted. The extension was approved by the NAMA CEO and Chairman. NAMA issued their approval to Lazard on 14 March 2014 to extend the bid date to 31 March 2014, in line with Lazard’s recommendation. 200. A further extension request from Lazard was sent to NAMA on 27 March 2014, asking for the bid date to be extended from 31 March 2014 to 1 April 2014 for both remaining parties in the process, Cerberus and Fortress. An extension of the bid date to 1 p.m. on 1 April was approved by the NAMA CEO and Chairman on 27 March 2014. 62 PAC Report on NAMA’s Sale of Project Eagle 201. NAMA has confirmed Lazard communicated the extension to Cerberus and Lazard but cannot indicate the time or date of this communication as it does not have access to Lazard’s correspondence. 202. On 25 March 2014 Cerberus wrote to the NI Minister for Finance and Personnel setting out its Investment and Operational Intentions regarding the acquisition of NAMA’s NI loan book. These included a long term asset investment strategy, utilisation of NI supply chains, release of corporate and personal guarantees as a key part of consensual workout plans for cooperative borrowers, incentivisation of incumbent borrowers, debt for equity, and the availability of further debt funding. 203. NAMA met with a senior Fortress executive on 25 March 2014 which was attended by NAMA’s CEO, Head of Asset Recovery and Deputy Head of Asset Recovery. Fortress requested the meeting for introductory purposes and NAMA has stated that there was no discussion of Project Eagle at the meeting. 204. On 31 March, the Managing Director of Fortress, sent a series of emails requesting a phone call to seek guidance. NAMA has advised that, following receipt of the emails, NAMA’s CEO directed the Head of Asset Recovery to contact the Fortress Managing Director and advise him that, as outlined in the Project Eagle Bid Process letter, which had been sent to all interested parties by Lazard, all communication in relation to the Project Eagle bid sales process would have to go through Lazard, the loan sale advisor. 205. A meeting between Cerberus representatives and Department of Finance officials took place on 28 March 2014. Evidence available to the Committee indicates that issues discussed included Cerberus’ recent purchase of Greenstar, the Irish waste management firm, its interest in the Permanent Trustee Savings Bank and its interest in the purchase of Project Eagle. 206. The Minister for Finance and Department of Finance officials met with Cerberus Chairman, Mr John Snow, and other senior managers on 31 March 2014. The Chairman of Cerberus stated its interest in Project Eagle and that they would be meeting NAMA later that day to discuss that interest. 207. A meeting between NAMA’s Chairman, CEO and Head of Asset Recovery with Cerberus Chairman, Mr John Snow, and other senior managers followed at 11.30 a.m. on that day. NAMA recorded that, during the meeting, the NAMA’s Chairman stated that NAMA would not discuss Project Eagle. NAMA also recorded that this was accepted by Cerberus representatives who said that it was a courtesy visit. 208. The NAMA Board was not informed of the meeting of its Chairman and CEO with the Cerberus Chairman the day prior to the bid closing date for Project Eagle. NAMA’s Chairman has stated that the reason for this is because Project Eagle was not discussed. 63 PAC Report on NAMA’s Sale of Project Eagle 209. The Committee notes NAMA’s own published Code of Practice in relation to the Disposal of Bank Assets. The Code does not include specific guidance in relation to procedures for contact with potential bidders during a bidding process. Conclusions 210. The Committee notes that NAMA’s Chairman and CEO met the Cerberus Chairman the day prior to the bid closing date for Project Eagle. The Committee also notes that the Chairman has stated that Project Eagle was not discussed at that meeting. Nonetheless, the Committee is of the opinion that the Board should have been informed of the Cerberus meeting when the Board met on 3 April 2014, and agreed to sell Project Eagle to Cerberus. 211. The Committee considers that it was not appropriate for NAMA, as the contracting body, to meet with Cerberus representatives the day before the Project Eagle bid closing date. It could have given the perception that Cerberus was benefitting from preferential treatment. 212. The Committee is further of the view that there was an inconsistency in NAMA’s treatment of a request for communications/meetings from different bidders that could be perceived as unfair. 213. The Committee considers that it was not procedurally appropriate for Department of Finance Officials to meet with Cerberus representatives in the days leading up to the Project Eagle bid closing date. This could have given the perception that Cerberus was benefitting from preferential treatment. 214. The Committee considers that it was not procedurally appropriate for the Minister for Finance to meet with senior Cerberus representatives the day before the Project Eagle bid closing date. This could have given the perception that Cerberus was benefitting from preferential treatment. THE DISCLOSURE BY CERBERUS OF SUCCESS FEE ARRANGEMENTS 215. Following a request to Cerberus on 3 April 2014 from NAMA to ascertain whether success fees were payable, the Managing Director of Cerberus emailed NAMA’s Head of Asset Recovery. Cerberus’ Managing Director indicated Cerberus had engaged New River as retail advisor but had retained the law firm Brown Rudnick as a strategic advisor for the Project Eagle sales process. Brown Rudnick’s role was to advise on the bid structure and on doing business in Northern Ireland, because of its experience working with NAMA and in real estate and restructuring activities in Nl. 64 PAC Report on NAMA’s Sale of Project Eagle 216. Later that day Mr. Rawald sent a further email to NAMA’s Head of Asset Recovery to advise that following review by Cerberus General Counsel, in the spirit of completeness of disclosure, Cerberus was informing NAMA that Brown Rudnick had subcontracted part of their work to the Belfast law firm Tughans and that Brown Rudnick would share 50% of its success fee with Tughans. 217. This second email also stated that Cerberus’ agreement with Brown Rudnick included, as a prior condition to the payment of the success fee, that Brown Rudnick would obtain and provide Cerberus with a written certification from Tughans regarding its conforming to requirements of USA Foreign Corrupt Practices Act (1977) and the UK Bribery Act (2010). 218. Cerberus was asked by NAMA to provide assurance that the success fee was limited exclusively to Brown Rudnick and Tughans and that no further sharing of the fee was agreed. THE NAMA BOARD MEETING OF 3 APRIL 2014 219. A NAMA Board meeting, arranged at short notice took place on 3 April 2014. As a result, only the CEO was in the room with four other Board members participating by conference call. At the meeting, the payment of success fees by Cerberus was discussed. The Board was informed that the success fee was to be split 50:50 between Brown Rudnick and Tughans and that Cerberus had provided assurance that no further sharing of the fee was agreed. 220. NAMA’s Head of Legal Affairs informed the Board that Cerberus had confirmed that the potential fee was payable to Tughans and no individual partner had been named. 221. The Board then considered a paper prepared by Asset Recovery in relation to the bidding process to date and the final two bids from Cerberus and Fortress. Among the key items the Board noted:  That the minimum reserve price had been adjusted downwards to STG £1.23 billion (from STG £1.3 billion) following sales of assets of STG £83.6 million from within the Project Eagle portfolio.  The Fortress bid of STG £1.075 billion: a) was STG £155 million below the adjusted minimum reserve price b) did not allocate their offer price to individual assets (a requirement of the process) c) was conditional on being granted exclusivity for 30 days with a 30 day extension d) included a business plan that lacked detail relative to Cerberus  The Cerberus bid of STG £1.241 billion: 65 PAC Report on NAMA’s Sale of Project Eagle a) b) c) d) was STG £11 million above the adjusted minimum reserve price allocated price to individual assets did not include exclusivity conditions included a better business plan relative to Fortress 222. The Board agreed at the meeting to get written assurance from Cerberus that no fee, commission or other remuneration or payment was payable to any current or former member of the NAMA Board or Executive member or any current or former member of a NAMA advisory committee in connection with any aspect of Cerberus’ participation in the Project Eagle sales process. 223. The Board resolved:  to continue negotiations solely with Cerberus as the lead bidder with a view to closing the Project Eagle loan Sale by 31 May 2014  to approve the Cerberus offer at a level of STG £1.241 billion  to delegate authority to the CEO and NAMA’s Head of Asset Recovery to approve a revised minimum sales price of STG £1.2 billion should final due diligence issues emerge which could impact value, and to negotiate the terms and conditions of the final legal documentation. 224. The sale of Project Eagle was completed in June 2014 for an eventual sum of STG £1.137 billion. 225. The reason that Cerberus paid less than its bid price was to take account of the properties that NAMA had sold while the sales process was underway. The adjustment was made by reducing the Cerberus bid by the amounts Cerberus had allocated to the properties that had been sold by the time the sale closed. This amounted to STG £104 million, a large part of which was the group of properties in the portfolio sold under the codename “Project Shift”. 226. During his appearance before the Committee on 17 November 2016, Mr Mark Neporent, Chief Financial Officer of Cerberus, disclosed that there had been three breaches of their non-disclosure agreement with NAMA. Cerburus had given specific details relating to the sales process to Brown Rudnick. Mr Neporent stated that the view that the “disclosure of this procedural information was not material in the context in which it occurred.” However, NAMA was not aware of these breaches until they were disclosed at the Committee meeting with Mr Neporent. The breaches disclosed were as follows:  On 21 March 2014, Cerberus told Brown Rudnick details of the adjusted reserve price,  On 25 March 2014, Cerberus shared a letter received from Lazard with Brown Rudnick and they believed that this was shared by Brown Rudnick with Tughans, and 66 PAC Report on NAMA’s Sale of Project Eagle  On 27 March, Cerberus told Brown Rudnick that Cerberus’ request for an extension to bid deadline had been granted. 227. Following his appearance before the Committee, Mr Neporent of Cerberus confirmed in correspondence that Cerberus had not informed NAMA that it had engaged the services of Brown Rudnick prior to the submission of its final bid. LAZARD’S POST-SALE REPORT AND ‘COMFORT LETTER’ 228. Lazard provided a report to NAMA in a letter dated 2 April 2014. In it, Lazard noted that the process involved a limited number of highly qualified bidders, limited due diligence information, a single round of bidding and the requirement for bidders to acquire the portfolio ‘entirely in cash’ (i.e. with the required funding in place). 229. Lazard issued a completion letter to NAMA on 25 June 2014 in relation to the sales process. In it Lazard stated “we express no opinion regarding the underlying decision to dispose of the portfolio and our advice does not address the relative merits of the transaction as compared to alternative transactions, timing or strategies that might be available to NAMA.” They give their financial advisory judgement that “having regard to the information available to us and NAMA’s objectives, the sell-side process of the transaction was appropriate for the sale of a loan portfolio of this nature.” 230. NAMA provided a letter to the C&AG dated 11 May 2016 that NAMA had requested from KPMG in connection with market valuations. The document refers to three definitions of market value as follows: The Royal Institute of Chartered Surveyors definition of market value “The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller on an arm’s length transaction and after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.” The International Valuations Standards Council “The estimated amount for which an asset or liability should exchange on valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing where the parties had each acted knowledgeably, prudently and without compulsion.” International Accounting Standards Board “… the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” 67 PAC Report on NAMA’s Sale of Project Eagle The Committee notes that the letter states that all definitions share a common theme and that market value ultimately requires willing participants and a well designed sales process. Conclusions 231. It is the Committee’s opinion that, with regard to Lazard’s limited role in the sales process and the fact that it did not have full access to information, the letter of comfort provided by Lazard to NAMA fails to provide assurance that the sales strategy followed by NAMA in relation to Project Eagle was the best one possible. 232. It is the view of the Committee that the sales strategy pursued by NAMA included restrictions of such significance that the strategy could be described as seriously deficient. It is, therefore, the opinion of the Committee that NAMA has been unable to demonstrate that by pursuing such a strategy that it got value for money for the Irish State in relation to the price achieved. 68 PAC Report on NAMA’s Sale of Project Eagle APPENDIX 1 COMMITTEE MEMBERSHIP Bobby Aylward (FF) Peter Burke (FG) Shane Cassells (FF) Catherine Connolly (I4C) David Cullinane (SF) Alan Farrell (FG) Seán Fleming (FF) Alan Kelly (Lab) Marc MacSharry (FF) Chairman Vice-Chairman 69 PAC Report on NAMA’s Sale of Project Eagle Josepha Madigan (FG) Mary Lou McDonald (SF) Catherine Murphy (SD/GPTG) Noel Rock (FG) 70 PAC Report on NAMA’s Sale of Project Eagle APPENDIX 2 GLOSSARY OF KEY TERMS Asset Recovery (AR) Asset Recovery is a section within NAMA that deals with debtors and receivers and has three main functions: strategy delivery, management of debtors and receivers and maximising cash flow while minimising loss. Bad loan A loan where repayments are not being made as originally agreed between the borrower and the lender, and which may never be repaid. Debtor Connection May consist of one debtor or a number of closely-connected debtors whose aggregate debt is considered by NAMA to be best managed as one cohesive connection rather than managed through separate debtor entities. Net present value discount rate Used to translate the value of future cash flows into ‘today’s’ terms. It adjusts future figures to allow for the fact that a sum of money received today is of greater value than a similar sum of money that will be received in the future. Financial Derivative A derivative is a complicated financial contract that gets (derives) its value from an underlying asset. The buyer and seller agree on how much the asset price will change over a specific period. Foreign Corrupt Practices Act 1977 United States federal law known primarily for two of its main provisions, one that addresses accounting transparency requirements under the Securities Exchange Act of 1934 and another concerning bribery of foreign officials Impairment Impairment of a fixed asset is a decrease of its fair value due to damage, obsolescence etc. When impairment of a fixed asset occurs, the business has to decrease its value in the balance sheet and recognise a loss in the income statement. Market value The estimated amount for which an asset should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing where the parties had each acted knowledgeably, prudently and without compulsion 71 PAC Report on NAMA’s Sale of Project Eagle (International Valuation Standards Council – advice from KPMG to NAMA, May 2016) NAMA debt NAMA debt is the acquisition value of a loan minus amounts received from the debtor, plus amounts advanced to the debtor, plus interest charged. Non Performing Loan A loan that is in default or close to being in default. Open Sales process According to NAMA, one which is open to all potential bidders with the financial capacity to submit credible arm’s-length bids for the asset or assets concerned and to do so knowledgably, prudently and without compulsion. NAMA is guided by the NAMA Act in relation to this. Par debt Par debt refers to the full amount owed by a borrower based on the original terms and conditions with the bank from which he obtained the loan, and without taking account of any discount applied by NAMA when it acquired the loans. Senior debt Debt is secured debt or debt that takes priority over other unsecured debt in terms of repayment Subordinated Debt that is either unsecured or has a lower priority than another Debt debt claim on the same asset or property. Also referred to as junior debt Transact off Market NAMA use this to describe cases in which an open market process is not appropriate such as, for instance, cases where there may be special purchasers or legal issues. It is also used in cases where a public authority purchases a NAMAsecured property at the assessed market value outside of a formal open market sales process. This is in line with the NAMA Board’s commitment to giving first option to public bodies on the purchase of property which may be suitable for their purposes. Troika European troika, the tripartite group led by the European Commission with the European Central Bank and the International Monetary Fund, that organised loans to the governments of Greece, Ireland, 72 PAC Report on NAMA’s Sale of Project Eagle Portugal, and Cyprus. UK Bribery Act The Bribery Act 2010 (c.23) is an Act of the Parliament of the United Kingdom that covers the criminal law relating to bribery. Workout value of loans There is no technical definition of loan workout value. It can be considered as the net present value of the expected loan cash flows in an asset-by-asset workout, discounted at a rate that incorporates the loan owner’s cost of capital and a risk premium. 73 PAC Report on NAMA’s Sale of Project Eagle APPENDIX 3 REPORT LIST OF MAIN BODIES/PERSONS PERTINENT TO THIS Apollo Global Management LLC US based investment firm. Invited to participate in Project Eagle sales competition (second round approach) but declined to continue after signing a non-disclosure agreement. Blackstone Group Mainly US based investment firm. Invited to participate in Project Eagle sales competition (first round approach) but declined. Brian Rowntree CBE Appointed by the NAMA Board to the NIAC as an external member. His appointment was agreed by the Minister for Finance following consultation with the Northern Ireland Minister for Finance and Personnel. He has been an independent member of the Northern Ireland Policing Board and as a civil service commissioner has held appointments in housing, criminal justice, health and further education as well as chairing corporate governance forums both in Northern Ireland and on a cross-Border basis. He was a member NIAC from May 2010 until its dissolution. Brown Rudnick An international law firm based in Boston and specialising in bankruptcy, structured finance, corporate, litigation and real estate law. PIMCO was a client of the firm. Cerberus Cerberus Capital Management, L.P. is a private investment firm based in New York City. A key activity of the firm is the management of funds and accounts for worldwide investors in distressed debt. In April 2014, NAMA agreed the sale of the Project Eagle portfolio to Cerberus for a price of €1,137m. Cushman and Wakefield Corporate Finance Ltd Fortress International firm of loan sale advisors. PIMCO’s property advisors. Moved to Fortress following PIMCO’s withdrawal. Provided advice to NAMA in January 2016 about the discounts purchasers of distressed loan portfolios would be likely to have applied in early 2014. Headquartered in New York City, Fortress Investment Group LLC is a leading, diversified global investment management firm. At its own request Fortress was admitted to Project Eagle sales competition. It was the under bidder for the portfolio. 74 PAC Report on NAMA’s Sale of Project Eagle Frank Cushnahan Appointed by the NAMA Board to the NIAC as an external member. His appointment was agreed by the Minister for Finance following consultation with the Northern Ireland Minister for Finance and Personnel. He was a member NIAC from May 2010 until his resignation on 8 November 2013 Goldman Sachs Headquartered in New York City, the Goldman Sachs Group, Inc. is a US multinational finance firm that engages in global investment banking, investment management, securities, and other financial services, primarily with institutional clients. At its request the firm was admitted to the Project Eagle sales competition but subsequently withdrew. John Snow Chairman of Cerberus, the successful bidder for Project Eagle. Lazard Headquartered in Bermuda, Lazard and Company Ltd is a financial advisory and asset management firm that engages in investment banking, asset management, and other financial services primarily with institutional clients. On 8 January 2014 the NAMA Board appointed Lazard to act as its loan sale advisor for Project Eagle. Lone Star Headquartered in Dallas, Texas, Lone Star Funds is a US private equity firm that invests in distressed assets in the US, Canada and internationally. It was invited to participate in Project Eagle sales competition (second round approach). It accepted but subsequently withdrew. Mark Neporent The Chief Operating Officer, General Counsel and Senior Managing Director at Cerberus Capital Management, L.P. since 1998. NAMA The National Asset Management Agency – established in 2009 to acquire eligible loans, good and bad, from Irish banks, to protect or enhance the value of those assets and to dispose of them over time. New River Retail New River REIT plc is a UK based specialist real estate investment trust, focused primarily on retail and leisure property. The firm acted as PIMCO’s retail property advisors and moved to Cerberus following PIMCO’s withdrawal. NIAC The Northern Ireland Advisory Committee was established by the NAMA Board in January 2010. Its main purpose was to make 75 PAC Report on NAMA’s Sale of Project Eagle recommendations to the NAMA Board on matters pertaining to Northern Ireland in the context of NAMA’s objectives and functions and to make recommendations to the Board concerning NAMA’s strategy for Northern Ireland assets. NTMA The National Treasury Management Agency (NTMA), including its Compliance Unit, provides support services to NAMA. Oaktree An investment management firm which was invited to join the Project Eagle sales process. Invited to participate in Project Eagle sales competition Patrick Long Managing Director of Lazard and Company Ltd. PIMCO Pacific Investment Management Company LLC, a US based global investment management firm. PIMCO, a client of Brown Rudnick, in September 2013 sent NAMA a non-binding indication of interest in the Northern Ireland portfolio. Project Eagle A code name for a portfolio of the loans of NAMA’s Northern Ireland debtors and for which the NAMA Board set a price STG £1.3 billion. SIPO(C) The Standards in Public Office Commission is an independent body established in December 2001 by the Irish Government under the Standards in Public Office Act, 2001. It is the supervisory body for compliance with legislation concerning ethical issues regarding politicians, office holders and civil servants. Starwood Starwood Capital Group is a US based private investment firm with a primary focus on global real estate. The firm was invited to participate in the Project Eagle sales competition (first round approach) but declined. Tughans A commercial law firm based in Belfast. Brown Rudnick subcontracted certain work to Tughans. 76 PAC Report on NAMA’s Sale of Project Eagle APPENDIX 4 COMMITTEE TERMS OF REFERENCE Committee of Public Accounts 186. (1) There shall stand established, following the reassembly of the Dáil subsequent to a General Election, a Standing Committee, to be known as the Committee of Public Accounts, to examine and report to the Dáil upon— a) the accounts showing the appropriation of the sums granted by the Dáil to meet the public expenditure and such other accounts as they see fit (not being accounts of persons included in the Second Schedule of the Comptroller and Auditor General (Amendment) Act 1993) which are audited by the Comptroller and Auditor General and presented to the Dáil, together with any reports by the Comptroller and Auditor General thereon: Provided that in relation to accounts other than Appropriation Accounts, only accounts for a financial year beginning not earlier than 1 January, 1994, shall be examined by the Committee; b) the Comptroller and Auditor General’s reports on his or her examinations of economy, efficiency, effectiveness evaluation systems, procedures and practices; and c) other reports carried out by the Comptroller and Auditor General under the Act. (2) The Committee may suggest alterations and improvements in the form of the Estimates submitted to the Dáil. (3) The Committee may proceed with its examination of an account or a report of the Comptroller and Auditor General at any time after that account or report is presented to Dáil Éireann. (4) The Committee shall have the following powers: a) power to send for persons, papers and records as defined in Standing Order 88; b) power to take oral and written evidence as defined in Standing Order 85(1); c) power to appoint sub-Committees as defined in Standing Order 85(3); d) power to engage consultants as defined in Standing Order 85(8); and e) power to travel as defined in Standing Order 85(9). 77 PAC Report on NAMA’s Sale of Project Eagle (5) Every report which the Committee proposes to make shall, on adoption by the Committee, be laid before the Dáil forthwith whereupon the Committee shall be empowered to print and publish such report together with such related documents as it thinks fit. (6) The Committee shall present an annual progress report to Dáil Éireann on its activities and plans. (7) The Committee shall refrain from— a) Enquiring into in public session, or publishing, confidential information regarding the activities and plans of a Government Department or office, or of a body which is subject to audit, examination or inspection by the Comptroller and Auditor General, if so requested either by a member of the Government, or the body concerned; and b) Enquiring into the merits of a policy or policies of the Government or a member of the Government or the merits of the objectives of such policies. (8) The Committee may, without prejudice to the independence of the Comptroller and Auditor General in determining the work to be carried out by his or her Office or the manner in which it is carried out, in private communication, make such suggestions to the Comptroller and Auditor General regarding that work as it sees fit. (9) The Committee shall consist of twelve members, none of whom shall be a member of the Government or a Minister of State, and four of whom shall constitute a quorum. The Committee and any sub-Committee which it may appoint shall be constituted so as to be impartially representative of the Dáil. 78 PAC Report on NAMA’s Sale of Project Eagle APPENDIX 5 WITNESSES WHO PROVIDED ORAL EVIDENCE AND LINKS TO TRANSCRIPTS Transcripts of each meeting are available by clicking on link at bottom each witness list or by going to: http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/com mitteedatelist?readform&year=2016&code=AC Note also that the C&AG’s office was represented at each meeting although the C&AG’s principal oral evidence was given on the two meetings of 29 September and 10 October 2016. 29 September 2016 Principal Witnesses: NAMA Representatives and C&AG Name Organisation Mr Seamus McCarthy Comptroller and Auditor General Mr John Riordan Deputy Director of Audit, Office of the Comptroller and Auditor General Mr Frank Daly Chairman, NAMA Mr Brendan McDonagh Chief Executive Officer, NAMA Mr Brian McEnery NAMA Board Member and Chairman of Audit committee Mr John Coleman Chief Financial Officer, NAMA Ms Aideen O’Reilly Head of Legal, NAMA Mr John Collison Head of Residential Delivery, NAMA Mr Declan Reid Specialist Shareholding Management Unit, Dept. of Finance Transcript 29 September 79 PAC Report on NAMA’s Sale of Project Eagle 6 October 2016 Principal Witness: Minister of Finance Name Organisation Minister Michael Noonan Minister for Finance, Dept. of Finance Ms Anne Nolan Second Secretary, Dept. of Finance Mr Des Carville Head of Shareholding Management, Dept. of Finance Mr Declan Reid Specialist Shareholding Management Unit, Dept. of Finance Mr Seamus McCarthy Comptroller and Auditor General Mr John Riordan Deputy Director of Audit, Office of the Comptroller and Auditor General Transcript 6 November 13 October 2016 Principal Witnesses: Former Northern Ireland Advisory Committee Member Name Organisation Mr Brian Rowntree Former member of Northern Ireland Advisory Committee (NIAC) Mr Seamus McCarthy Comptroller and Auditor General Ms Mairead Cosgrove Auditor, Office of the Comptroller and Auditor General Transcript 13 October 80 PAC Report on NAMA’s Sale of Project Eagle 18 October 2016 Principal Witnesses: NAMA Board Members Name Organisation Mr Willie Soffe NAMA Board Member Mr Oliver Ellingham NAMA Board Member Mr Brian McEnery NAMA Board Member Mr John Riordan Deputy Director of Audit, Office of the Comptroller and Auditor General Mr Andy Harkness Secretary and Director of Audit, Office of the Comptroller and Auditor General Transcript 18 October 25 October 2016 Principal Witnesses: Senior NAMA Executives Name Organisation Mr John Collison Deputy Head of Asset Recovery at NAMA Mr Michael Moriarty Head of Asset Recovery, NAMA Mr Alan Stewart Senior Divisional Solicitor, NAMA Mr Donal Rooney Former Chief Financial Officer, NAMA Mr Seamus McCarthy Comptroller and Auditor General Mr John Riordan Deputy Director of Audit, Office of the Comptroller and Auditor General Transcript 25 October 81 PAC Report on NAMA’s Sale of Project Eagle 10 November 2016 Principal Witnesses: C&AG and Department of Finance Officials Name Organisation Ms Anne Nolan Second Secretary, Dept. of Finance Mr Declan Reid Banking Specialist, Dept. of Finance Mr Des Carville Head of Shareholding Management, Dept. of Finance Mr Seamus McCarthy Comptroller and Auditor General Mr John Riordan Deputy Director of Audit, Office of the Comptroller and Auditor General Transcript 10 November 16 November 2016 Principal Witnesses: Northern Ireland Deputy First Minister Name Organisation Mr Martin McGuinness Deputy First Minister, Northern Ireland Executive Mr Seamus McCarthy Comptroller and Auditor General Mr John Riordan Deputy Director of Audit, Office of the Comptroller and Auditor General Transcript 16 November 82 PAC Report on NAMA’s Sale of Project Eagle Morning 17 November 2016 (Session A) Principal Witnesses: Former NAMA Board Members Name Organisation Ms Eilish Finan Former Member of NAMA Board Mr John Mulcahy Former Member of NAMA Board Mr John Corrigan Former Member of NAMA Board Mr Seamus McCarthy Comptroller and Auditor General Mr John Riordan Deputy Director of Audit, Office of the Comptroller and Auditor General Transcript 17 November Afternoon 17 November 2016 (Session B) Principal Witnesses: Chief Operating Officer, Cerberus Name Organisation Mr Mark Neporent Chief Operating Officer, Cerberus Mr Seamus McCarthy Comptroller and Auditor General Mr John Riordan Deputy Director of Audit, Office of the Comptroller and Auditor General Transcript 17 November 83 PAC Report on NAMA’s Sale of Project Eagle 22 November 2016 Principal Witnesses: Managing Director, Lazard Name Organisation Mr Patrick Long Managing Director and Head of UK Real Estate, Lazard Mr Seamus McCarthy Comptroller and Auditor General Mr John Riordan Deputy Director of Audit, Office of the Comptroller and Auditor General Transcript 22 November 24 November 2016 Principal Witnesses: NAMA Representatives Name Organisation Mr Frank Daly Chairman, NAMA Mr Brendan McDonagh Chief Executive Officer, NAMA Mr John Coleman Chief Financial Officer, NAMA Ms Aideen O’Reilly Head of Legal, NAMA Mr Alan Stewart Senior Divisional Solicitor, NAMA Mr John Collison Head of Residential Delivery, NAMA Mr David Linehan NAMA Liaison Officer, Dept. of Finance Mr Seamus McCarthy Comptroller and Auditor General Mr John Riordan Deputy Director of Audit, Office of the Comptroller and Auditor General Transcript 24 November 84 PAC Report on NAMA’s Sale of Project Eagle 14 December 2016 Principal Witnesses: NAMA Representatives Name Organisation Mr Frank Daly Chairman, NAMA Mr Brendan McDonagh Chief Executive Officer, NAMA Mr Seamus McCarthy Comptroller and Auditor General Mr John Riordan Deputy Director of Audit, Office of the Comptroller and Auditor General Transcript 14 December 85 PAC Report on NAMA’s Sale of Project Eagle APPENDIX 6 PAC MINUTES 8 MARCH 2017 Committee of Public Accounts Proceedings of the Committee, Wednesday, 8 March, 2017 The Committee met at 16.45 a.m. in Committee Room 1, LH 2000, a quorum being present. The following members were present:Deputies; Sean Fleming, David Cullinane, Alan Kelly, Alan Farrell, Peter Burke, Catherine Murphy, Catherine Connolly, Shane Cassells, Mary Lou McDonald, Marc MacSharry,Bobby Aylward and Josepha Madigan. Examination of the Sale of Project Eagle The Committee deliberated. The Committee proceeded to consider a draft report brought forward by the Chairman. (i) Paragraphs A1 to A54, inclusive, agreed to. (ii) Paragraphs B1 to B10, inclusive, agreed to. (iii) Sale of Project Eagle timeline agreed to. (iv) Paragraphs 1 to 208, inclusive, agreed to. (v) New Paragraph Amendment proposed (Chairman): Before Paragraph 209, to insert the following paragraph: “208A. The Committee notes NAMA’s own published Code of Practice in relation to the Disposal of Bank Assets. The Code does not include specific guidance in relation to procedures for contact with potential bidders during a bidding process.” Question: - “That the new paragraph be there inserted” - agreed to. (vi) Paragraphs 209 to 211, inclusive, agreed to. (vii) Paragraph 212 86 PAC Report on NAMA’s Sale of Project Eagle Amendment proposed (Josepha Madigan): “In paragraph 212, in the first and second lines, to delete ‘not procedurally appropriate for Department of Finance Officials’ and substitute ‘not advisable for Department of Finance Officials’.”. Question: − "That the amendment be made” − put. The Committee divided: Tá, 5: Níl, 8. Tá: Peter Burke, Alan Farrell, Alan Kelly, Josepha Madigan, Noel Rock Níl: Bobby Aylward, Shane Cassells, Catherine Connolly, David Cullinane, Seán Fleming, Marc MacSharry, Mary Lou McDonald, Catherine Murphy Question declared negatived accordingly. Paragraph agreed to. (viii) Paragraph 213 Amendment proposed (Josepha Madigan): “In paragraph 213, in the first and second lines, to delete ‘procedurally appropriate for the Minister’ and substitute ‘advisable for the Minister’.”. Question:− "That amendment be made” − put. The Committee divided : Tá 5: Níl 8. Tá: Peter Burke, Alan Farrell, Alan Kelly, Josepha Madigan, Noel Rock Níl: Bobby Aylward, Shane Cassells, Catherine Connolly, David Cullinane, Seán Fleming, Marc MacSharry, Mary Lou McDonald, Catherine Murphy Question declared negatived accordingly. Question:- “ That paragraph 213 stand part of the draft report” - put The Committee divided: Tá, 9; Níl, 4. Níl: Peter Burke, Alan Farrell, Josepha Madigan, Noel Rock Tá: Bobby Aylward, Shane Cassells, Catherine Connolly, David Cullinane, Seán Fleming, Alan Kelly, Marc MacSharry, Mary Lou McDonald, Catherine Murphy Question was declared carried accordingly. (ix) Paragraphs 214 to 231, inclusive, agreed to. (x) Appendices agreed to. 87 PAC Report on NAMA’s Sale of Project Eagle Question: − “That the draft report be the report of the Committee” – put. The Committee divided: Tá, 9; Níl, 4. Níl: Peter Burke, Alan Farrell, Josepha Madigan, Noel Rock Tá: Bobby Aylward, Shane Cassells, Catherine Connolly, David Cullinane, Seán Fleming, Alan Kelly, Marc MacSharry, Mary Lou McDonald, Catherine Murphy The Question was declared carried accordingly. Ordered: That the Report be laid before the Dáil [Chairman]. It was agreed to include a copy of a letter in the report from the Minister for Finance in relation to conclusions pertaining to him and his officials. Adjournment The Committee adjourned at 18.01 a.m. until following day 9 March 2017. _______________ Seán Fleming, T.D Chairman 8 March 2017 88 PAC Report on NAMA’s Sale of Project Eagle APPENDIX 7 LETTER FROM MINISTER FOR FINANCE Note :The letter below was sent by the Minister for Finance, Michael Noonan, to the Committee referring to a draft working paper of the Committee on its examination of the Sale of Project Eagle, as reported in media publications. 89 muting and right anllr :uch cumin-lamina arequir-Ern-Er'lt nE jttE-liiIL-E. 1 alan- remind that I and mar of minimum E-tJrI'lr'rI-itt? we: the Enume- uhhree slap-anti clays. Thu :Ir?hhll run-rd: Elf bull'l aural and written, mill-m that mating: with Cerberus am! :11 nm such meeting-i were apprm?ata Her: n-ul: discussed raised as. an at MI..- state during the I'I-lialrlnaj. Hurlinu?r,i' this. waea substantive :unal-tlemtlur- for the both land mar of?cials :ll'lnulti dearly have been lmlte? to puhllcalal 5m: H1: factual per-lien fur th= reward. THE .15 funda-mental ngjl'rt-u-fduq pro-DH: il'lltl I'l'ir pt-?-t?thlf?. BISEI that I ?nulde-[I remind-5 rillaling tn this: meeting; the Cemrn-Ittee In mar cerresu-n-rhderrce hf 3 Hum-antler 1015 and 21115. The recent; relatnl: to that-e meetings had walnut-been released untler the Heednrn at Infurmatten in Haunt-if EDIE- lwantte mncallnuu H?li't In Him and twil ant-grunting all the amnesia EllhEl'u'I'iI?l- II it. 1'th the Hitler fer Fina-nee vmuld meet IInt-lit: the than-man hf a majur Imam-?ung] Ingest-neat hurl and term-er Secretari- ef the LIE request he um. in Dublin-m bush-ea; areal-Ham from dncumu?atinn whirl-Ed ta- Iht- and ms. [ewe-I In nature: ll; unusual HIE lnappreprl-ate fun-r flu-r Flnancl- nut In meet HM and: nntahle Intllulduals and ?rms. I have had mim- ?lm-[3r in the at run.- {hues and there in: nil-rut :Irrgr treatment" Indeed paw-led or nthemlae. In: alan- I'nr'ul'r nl'l'leiale wnuld nun-t allth relaraentalhes hf ?rm: wha- hmr: a Etna-H i'llEfE'S-l. lrlih auets. The Ennmitee is aware cut and has acute-Med the tl?r legal Hparatien between truth the leithlr fur Finance and the Dena-rtrrI-ent at FIn-nu :nd Mule-?5 enaallms. hilr met-mg farmer Se-uetar'r Sum-.- and mr u?l-cleh" mai?r-E with i1 March Jill-1 rue-I. alter the fact that nel'?'ler I nur mar uH-eial: were lnuellrerl -n the Praia-rt Eight sales FIFE-CHE. F.5- l5 well we we aware that 1h: Pruject Eagle precess was underway and Calm-w: did Inform IE it the bur-HI in? that the-.- in In: partlal-imThie waethe extent at engagement an: 90 PAC Report on Sale of Project Eagle the matter and the meeting record deem states that any speclks o! the sale should be discussed with ?Becreto?y Show] noted that they have Interest In PW Eagle. Interest. Secretory Snow mm?oned the process letter from MAMA but was suggested that it would be most appropriate to that Issue at the meeting?. I would strong? request that you, as Chairman. and the Committee members tolne note at the factual points I have need in this letter when considering your ?nd report. I am also sure that any conclusions which do metertettse In the ?nat report. be based on available evidence, the and (or process and loocal reasoning which mm challenge. Vouts sincere?, d. Mkneet Mona?, 7.0. for ?nance 91 PAC Report on NAMA’s Sale of Project Eagle APPENDIX 8 KEY CURRENCY VALUES STERLING/EURO Item Sterling Amount Approx. Euro equivalent PIMCO’s indicative bid £1.1 to 1.3 billion €1.38 to €1.63 billion Initial Project Eagle Minimum Reserve price £1.3 billion €1.63 billion Revised Minimum Reserve Price £1.23 billion €1.54 billion Cerberus Bid £1.241 billion €1.56 billion Fortress Bid £1.075 billion €1.35 billion Final Sales Price £1.137 billion €1.43 billion C&AG Project Eagle valuation calculated at 5.5% Net Present value £1.489 billion €1.87 billion NAMA Project Eagle valuation calculated at 5.5% Net Present value £1.381 billion €1.73 billion Note 1: The Sterling/Euro exchange rate fluctuated over the course of Project Eagle. In order to allow for meaningful comparisons, the exchange rate when the loans were sold (£0.798: €1) has been used. Note 2: Final Sales Price lower than Revised Minimum Price because of certain loans having been sold between date when price was set and sale was completed. 92 PAC Report on NAMA’s Sale of Project Eagle APPENDIX 9 SOURCES CITED IN THIS REPORT The table below includes a list of sources used by relevant paragraph section number of this report. Page numbers or Section numbers in source documents are indicated where relevant. Paragraph No. Source Source Doc. Page/Section Number 1 C&AG Special Report 94 P 9-10 2 Transcript of Committee Meeting dated 01.10.2015 P.21 3 C&AG Press Release 14.09.2016 4 C&AG Special Report 94 P.11 Section 17 5 Frank Daly Opening Statement 24.11.2016 P.7 6 Comment 7 Comment 8 Comment 9 Comment 10 Public Accounts Committee's Order of Reference ( Standing Order 186 ) 11 Public Accounts Committee's Order of Reference ( Standing Order 186 ) 12 a) b) & c) NAMA Correspondence to the Committee dated 12.01.2017 d) Correspondence from the National Crime Agency UK to the Committee dated 02.11.2016 e) & f) Cerberus Opening Statement to the Committee 22.11.2016 P.5 P.1 P.6 g) Irish Times Article 4.10.2016 13 Dept of Finance note on Establishment of The National Asset Management Agency 14 National Asset Management Agency Act 2009 P15-16 Dept of Finance note on Establishment of The National Asset Management Agency 15 National Asset Management Agency Act 2009 P.16 Section 2 P.24-25 Section 10 16 National Asset Management Agency Act 2009 P. 24-25 Section 10 17 Transcript of Committee Meeting dated 06.10.2016 P.8 93 PAC Report on NAMA’s Sale of Project Eagle No. Source Source Doc. Page/Section Number 18 National Asset Management Agency Act 2009 P.111 Section 172 (3) 19 Press Release - Special Report: National Asset Management Agency Progress Report 2010-2012 20 NAMA Press Statement 5 January 2017 P.1 21 NAMA Press Statement 5 January 2017 P.2 22 National Asset Management Agency Act 2009 P.50 Section 57 (2) 23 National Asset Management Agency Act 2009 P.135 Section 226 (1) 24 Comptroller and Auditor General (Amendment) Act 1993 Section 9 25 National Asset Management Agency Act 2009 P.135 Section 227 (1) 26 National Asset Management Agency Act 2009 P.47-49 Section 5355 27 National Asset Management Agency Act 2009 P 135-136 Section 227 28 National Asset Management Agency Act 2009 P37-39 Section 3233 29 National Asset Management Agency Act 2009 P37-38 Section 32 30 National Asset Management Agency Act 2009 P.38-39 Section 33 31 Comment 32 Dept of Finance NIAC Explanatory Note P.1 33 Dept of Finance NIAC Explanatory Note P.2 34 Dept of Finance NIAC Explanatory Note P.2 35 Dept of Finance NIAC Explanatory Note P.2 36 National Asset Management Agency Act 2009 P38-39 Section 33 37 Dept of Finance NIAC Explanatory Note P.1 38 Dept of Finance NIAC Explanatory Note P.1 39 Dept of Finance NIAC Explanatory Note P.1 40 Dept of Finance NIAC Explanatory Note P.1 41 Dept of Finance NIAC Explanatory Note P.1 42 Dept of Finance NIAC Explanatory Note P.1-2 43 NAMA: News Archive Detail View archive 18.06.2012 44 Dept of Finance NIAC Explanatory Note P.1 94 PAC Report on NAMA’s Sale of Project Eagle No. Source Source Doc. Page/Section Number 45 Dept of Finance NIAC Explanatory Note P.2 46 Email from NAMA to Committee dated 09.02.2017 P.2 47 C&AG Special Report 94 P.91 Fig. 5.10 48 Conclusion 49 Comment 50 Information prepared by Committee Secretariat and confirmed in consultation with NAMA 51 Information prepared by Committee Secretariat and confirmed in consultation with NAMA 52 Information prepared by Committee Secretariat and confirmed in consultation with NAMA 53 Information prepared by Committee Secretariat and confirmed in consultation with NAMA 54 Information prepared by Committee Secretariat and confirmed in consultation with NAMA 55 Information prepared by Committee Secretariat and confirmed in consultation with NAMA 56 Information prepared by Committee Secretariat and confirmed in consultation with NAMA 57 C&AG Special Report 94 58 www.cerberuscapital.com 59 C&AG Special Report 94 P.9 Section 2 60 NAMA correspondence to the Committee dated 10.11.2016 P.10 61 C&AG Special Report 94 P.22 Fig. 1.1 62 C&AG Special Report 94 P.22 Fig. 1.1 63 C&AG Special Report 94 P.29 Section 2.5 64 NAMA Correspondence to the Committee dated 01.02.2017 P.1-2 65 NAMA Correspondence to the Committee dated 01.02.2017 P.2 66 C&AG Special Report 94 P.9 Section 6 67 C&AG Special Report 94 P.36 Fig. 3.1 68 Comment 69 Letter from Brown Rudnick to the Committee dated 24.11.2016 P.2 70 Letter from Brown Rudnick to the Committee dated 24.11.2016 P.4 P.9 95 PAC Report on NAMA’s Sale of Project Eagle No. Source Source Doc. Page/Section Number 71 Meeting of the Committee of Public Accounts, 29 September 2016 P.70 72 Letter from PIMCO to the Committee dated 14.12.2016 P.1 73 Dept of Finance Correspondence dated 24.03.2013 P.3 74 Dept of Finance Correspondence dated 24.03.2013 P.3 75 Dept of Finance Correspondence dated 24.03.2013 P.1 76 NAMA Correspondence to The Committee dated 19.10.2016 P.11 77 PIMCO Letter to Committee on 8th November 2016 Minutes of NAMA Board Meeting 12th September 2013 P2 78 Conclusion 79 Conclusion 80 PIMCO Letter to Committee on 8th November 2016 P.2 Minutes of NAMA Board Meeting 12th September 2013 P.2 81 Minister Noonan response to PQ 03.10.2016 P.1-5 82 Minister Noonan response to PQ 03.10.2016 P.1-5 83 www.bbc.co.uk Article dated 27.09.2013 84 NIAC Minutes P.101 85 NIAC Minutes P101-102 86 NIAC Minutes P.106 87 NAMA Board Meeting Minutes dated 10.10.2013 P.9 88 NAMA Board Meeting Minutes dated 10.10.2013 P.9 89 NAMA Board Paper dated 10.10.2013 P.7 90 NAMA Board Paper dated 10.10.2013 P.4 91 NAMA Board Paper dated 10.10.2013 P.4 92 NAMA Board Paper dated 10.10.2013 P.4 93 C&AG Special Report 94 P.137 Section 1 94 C&AG Special Report 94 P.106-107 95 NAMA Correspondence to The Committee dated 24.10.2016 96 Minutes of NAMA Board Meeting of 12.12.2013 P.25-26 97 NAMA Board Meeting Paper, 12.12.2013 P.12 96 PAC Report on NAMA’s Sale of Project Eagle No. Source Source Doc. Page/Section Number 98 NAMA Board Meeting Paper, 12.12.2013 P.12 99 C&AG Special Report 94 P.139 Table 7 100 C&AG Special Report 94 P.139 Table 7 101 C&AG Special Report 94 P.139 Section 1.2 102 NAMA Board Meeting Paper, 12.12.2013 P.16 103 NAMA Board Meeting Paper, 12.12.2013 P.16 104 Conclusion 105 Conclusion 106 NAMA Board Meeting Paper, 12.12.2013 P.12 107 Transcript of Committee Meeting dated 24.11.2016 P.45 108 C&AG Special Report 94 P.34 Section 3.10 NAMA Board Meeting Paper, 12.12.2013 P.12 C&AG Special Report 94 P.144 Table 9, 109 P.41 Section3.39, P.50 Section 3.76 and P46 Section 3.50 110 NAMA Board Meeting Paper, 12.12.2013 P.19 111 NAMA Board Meeting Paper, 12.12.2013 P.19 112 C&AG Special Report 94 P.43 Figure 3.4 113 NAMA Board Meeting Paper, 12.12.2013 P.20 114 NAMA Board Meeting Paper, 12.12.2013 P.20 115 C&AG Special Report 94 P.11 Section 19 116 C&AG Special Report 94 P.12 Section 19 117 Figures based on C&AG Special Report 94 P.45 118 C&AG Special Report 94 P.144 Table 9 119 C&AG Special Report 94 P.144 Table 9 120 Comments based on C&AG Special Report 94 P.144 Table 9 121 Transcript of Committee Meeting dated 29.09.2016 P.28 122 Minutes of NAMA Board Meeting of 12.12.2013 P.25 97 PAC Report on NAMA’s Sale of Project Eagle No. Source Source Doc. Page/Section Number 123 Minutes of NAMA Board Meeting of 08.01.2014 P.31 124 NAMA Board Meeting Paper, 12.12.2013 P.22 125 National Asset Management Agency Act 2009 P.106 Section 158 (2)(a), 126 C&AG Special Report 94 P.136 127 Frank Daly Opening Statement 14.12.2016 P.2 128 Minutes of NAMA Board Meeting of 12.12.2013 P.25 129 NAMA Correspondence to the Committee dated 03.11.2016 P.11 130 Minutes of NAMA Board Meeting of 08.01.2014 P.30 131 Minutes of NAMA Board Meeting of 08.01.2014 P.31 132 Minutes of NAMA Board Meeting of 08.01.2014 P.31 133 Transcript of Committee Meeting dated 24.11.2016 P.15 134 C&AG Special Report 94 P.149 135 NAMA Correspondence to the Committee dated 12.01.2017 P.3 136 Figures based on C&AG Special Report 94 Figure 1.1, P.22 Paragraph 4.4, P. 63 NAMA Board minutes 10 Oct 2013 and related Board Paper P.106-107 and 131134 137 Minutes of NAMA Board Meeting of 08.01.2014 P.32 138 C&AG Special Report 94 P.68 Section 4.16 139 Minutes of NAMA Board Meeting of 08.01.2014 P.32 140 C&AG Special Report 94 P.14 Section 33 141 Conclusion 142 Conclusion 143 Conclusion 144 Conclusion 145 Conclusion 147 Conclusion 148 Conclusion 148 Conclusion 98 PAC Report on NAMA’s Sale of Project Eagle No. Source Source Doc. Page/Section Number 149 Conclusion 150 Conclusion 151 Conclusion 152 C&AG Special Report 94 P.114 153 C&AG Special Report 94 P.114-115 154 NAMA correspondence to the Committee dated 19.10.2016 P.5 155 C&AG Special Report 94 P.68 Section 4.17 156 Transcript of Committee Meeting dated 29.09.2016 P.113 157 Transcript of Committee Meeting dated 24.11.2016 P.79-80 158 C&AG Special Report 94 P.152 159 C&AG Special Report 94 P.152 160 Irish times article 13.02.2014 161 C&AG Special Report 94 P.115 162 C&AG Special Report 94 P.115 163 NAMA correspondence to the Committee dated 17.01.2017 P.5 164 C&AG Special Report 94 P.71 Table 4.6 165 Excerpt from NAMA correspondence to the Committee dated 24.10.2016 (a) 166 C&AG Special Report 94 P.72 167 Email from Apollo to NAMA dated 14.02.2014 P.4 168 NAMA correspondence to the Committee dated 06.12.2016 P.4 169 NAMA correspondence to the Committee dated 12.01.2017 P.2 170 NAMA correspondence to the Committee dated 06.12.2016 P.7-8 171 Transcript of Committee Meeting dated 22.11.2016 P.72 172 NAMA correspondence to the Committee dated 06.12.2016 P.4 173 NAMA correspondence to the Committee dated 06.12.2016 P.4 174 NAMA correspondence to the Committee dated 06.12.2016 P.7-8 175 Conclusion 176 Conclusion 177 Conclusion 99 PAC Report on NAMA’s Sale of Project Eagle No. Source Source Doc. Page/Section Number 178 C&AG Special Report 94 P. 78 Section 4.45 178 Brown Rudnick letter to Committee 24.12. 2016 P.6-7 178 PIMCO letter to Committee 8.11.2016 P.2-3 179 Transcript of Committee Meeting dated 29.09.2016 P.78 180 Minutes of NAMA Board Meeting of 11.3 2014 P.36 181 Minutes of NAMA Board Meeting of 11.3.2014 P.36 182 Minutes of NAMA Board Meeting of 11.3.2014 P.36 183 Minutes of NAMA Board Meeting of 11.3.2014 P.37 184 Minutes of NAMA Board Meeting of 11.3. 2014 P.37 185 C&AG Special Report 94 P.158 186 Minutes of NAMA Board Meeting of 11.3. 2014 P.38 187 Minutes of NAMA Board Meeting of 11.3. 2014 P.38 188 Minutes of NAMA Board Meeting of 11.3 2014 P.38 189 NAMA correspondence to the Committee dated 12.01.2017 P.4 190 Frank Daly Opening Statement to the Committee dated 24.11.2016 P.6 191 Minutes of Telephone Call between NAMA & PIMCO 12.03.2014 P.4 192 Minutes of Telephone Call between NAMA & PIMCO 12.03.2014 P.5 193 Conclusion 194 Conclusion 195 Conclusion 196 Conclusion 197 Conclusion 198 Conclusion 199 NAMA correspondence to the Committee dated 06.12.2016 P.4-5 200 NAMA correspondence to the Committee dated 06.12.2016 P.4-5 201 NAMA correspondence to the Committee dated 06.12.2016 P.4-5 202 Letter from Cerberus to NI Minister for Finance dated 25.03.2014 203 NAMA correspondence to the Committee dated 28.11. 2016 P.12 204 NAMA correspondence to the Committee dated 06.12.2016 P.3-4 100 PAC Report on NAMA’s Sale of Project Eagle No. Source Source Doc. Page/Section Number 205 Department of Finance Meeting Note 206 Department of Finance Meeting Note 207 NAMA correspondence to the Committee dated 28.11. 2016 P.12 208 NAMA correspondence to the Committee dated 22.12.2016, P.8 209 NAMA Code of Practice in relation to the Disposal of Bank Assets 210 Conclusion 212 Conclusion 212 Conclusion 213 Conclusion 214 Conclusion 215 Excerpt from NAMA correspondence to the Committee dated 24.10.2016 (b) 216 Excerpt from NAMA correspondence to the Committee dated 24.10.2016 (c) 217 Excerpt from NAMA correspondence to the Committee dated 24.10.2016 (c) 218 Excerpt from NAMA correspondence to the Committee dated 24.10.2016 (c) 219 Minutes of NAMA Board Meeting 3.4.2014 P.44 220 Minutes of NAMA Board Meeting 3.4.2014 P.44 221 Minutes of NAMA Board Meeting 3.4. 2014 P.44-45 222 Minutes of NAMA Board Meeting 3.4. 2014 P.45 223 Minutes of NAMA Board Meeting 3.4. 2014 P.46 224 C&AG Special Report 94 P.99 225 Note provided by C&AG 226 Cerberus Correspondence to NAMA dated 22.11.2016 227 Correspondence from Lazard to NAMA dated 02.04.2016 228 C&AG Special Report 94 P.82 Section 4.61 229 C&AG Special Report 94 P.83 230 C&AG Special Report 94 P.48, P.58-62 231 Conclusion 101 P1 PAC Report on NAMA’s Sale of Project Eagle No. 232 Source Source Doc. Page/Section Number Conclusion 102