Nama surplus to bring final bailout bill ‘below €30bn’

The total cost of the bank bailout is now likely to fall “comfortably” below €30bn, taking into account a surplus from Nama, Investec’s Philip O’Sullivan said yesterday.

The State bad bank said yesterday that it had paid off a further €1.09bn owed to banks whose property loans were transferred into the agency in 2010.

Nama said it is on course to clear all of its original €32bn of debt by the end of the year.

That would clear the way for the agency to close by its original deadline of 2020.

It paid for the loans taken from the banks with €30.4bn of senior bonds, or IOUs, and €1.6bn of subordinated bonds.

The loans had a face value of €70bn, and the difference translated into losses in the banks themselves.

As Nama sold off property it used the money to redeem the bonds.

The senior bonds are guaranteed by the State, so taxpayers were on the hook if Nama failed to repay the banks.

The latest redemption means 95pc of the guaranteed Nama bonds have now been paid off. Nama still holds billions of euro of assets, meaning it is now certain to more than cover its start-up costs, Mr O’Sullivan said.

“We’ve been saying for two years now that we expect Nama’s surplus to exceed €3bn, and this bears that out,” he said.

An original expectation that Nama would make a single payment to the Exchequer when it is wound up has changed, however, Mr O’Sullivan said.

The agency used low tax Section 110 companies to hold some assets. That structure became controversial last year after it was found to have enabled vulture funds to slash their tax bills in Ireland despite owning billions of euros worth of property and loans and was effectively scrapped in Budget 2017. As a result, Nama is expected to make annual tax payments ahead of its final surplus, though the total received by the State won’t be affected.

“The net cost of the bank bailout – taking into account returns from the banks, the IBRC liquidation and Nama – will be comfortably below €30bn,” Philip O’Sullivan said.

“€30bn is still a hell of a lot of money, but Nama has done a sterling job in difficult circumstances,” he said.

Earlier this month Nama made a €158m preliminary tax payment related to the closure of Section 110.

Yesterday, the Minister for Finance Michael Noonan confirmed that both State owned IBRC – the former Anglo Irish Bank, and the National Treasury Management Agency (NTMA) have both also used Section 110 companies to hold assets.

It was confirmed in a Dáil reply to Fianna Fáil’s Michael McGrath. IBRC used Section 110 before its 2013 liquidation, the minister said. The National Treasury Management Agency (NTMA) had backed investments that used Section 110 structures, including in connection with the Ireland Strategic Investment Fund (ISIF), the €8bn State investment fund.

While Section 110 has been used by private investors to slash their tax bills, Government agencies ultimately pay their surplus back to the Exchequer through dividends.
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