Ireland Said to Sell $1.1 Billion Junior NAMA Bonds at Discount

By Joe Brennan

Irish government-appointed officials agreed to sell 841 million euros ($1.1 billion) of junior bonds linked to the state’s bad bank at a discount to par value, according to two people familiar with the matter.
The government gave the former Anglo Irish Bank Corp. the bonds as part payment for toxic loans the bank sold in 2010 to the National Asset Management Agency. The notes are being sold after the state appointed KPMG in Dublin last year to liquidate the bank. The liquidators placed the notes with a range of institutional investors internationally, said the people, who asked not to be named as the matter is private.
Spokesmen for the liquidators, Kieran Wallace and Eamonn Richardson, Ireland’s finance ministry and Goodbody Stockbrokers in
Dublin, which is handling the sale, declined to comment.
Set up to purge Irish banks of toxic real estate loans, Dublin-based NAMA only pays out on junior bonds if it redeems all its senior debt by 2020. With commercial property prices rising, the agency made a first optional 5.264 percent interest payment on the securities earlier this year. NAMA is on course to make a profit of 1 billion euros over its lifetime, a person familiar with the matter said in May.
“NAMA’s payment of the coupon on the back of improved confidence in its outlook as property prices surge again was a game changer for the valuation of these instruments,” said Ciaran Callaghan, an analyst with Merrion Capital in Dublin. It’s likely the bonds were sold for at least the 72 percent of par at which Bank of Ireland Plc values similar notes it holds, Callaghan said.

Scrapped Sale

With the chances of the bonds paying out improving, KPMG, which is liquidating the former Anglo Irish, opted to restart the sale of the bank’s junior NAMA bonds. It scrapped an earlier sale process in December as bids failed to meet a reserve price.
“We’re not surprised the auction of the bonds went well given the success of NAMA and the investor appetite for Ireland with these bonds expected to give a double-digit yield for investors,” said Stephen Lyons, an analyst with Dublin-based securities firm Davy. “This may be the last hurrah for high-yielding Irish financial opportunities.”
Allied Irish Banks Plc (ALBK) and Bank of Ireland raised the value at which they hold the junior bonds after NAMA made the interest payment this year.

Junior Bonds

The former Anglo Irish, renamed Irish Bank Resolution Corp., valued its junior NAMA bonds at 15 cents on the euro in June 2012, according to its last set of publicly available accounts.
AIB increased the value of its subordinated NAMA notes to 65 percent of nominal value at the end of June from 10 percent a year earlier, while Bank of Ireland raised its valuation to 72 percent from 44 percent.
AIB has been able to generate a 257 million-euro gain since June last year, and Bank of Ireland (BKIR) made 78 million euros by revaluing their subordinated NAMA bonds,Callaghan at Merrion estimated.