Dáil Éireann Debate, Tuesday - 4 November 2014
346. Deputy Michelle Mulherin asked the Minister for Finance the difference in the amount bid by the highest bidder and the second highest bidder in respect of the sale of loans (details supplied); and if he will make a statement on the matter. [42241/14]
View answer347. Deputy Michelle Mulherin asked the Minister for Finance his views on the value offered to the taxpayer in the sale of certain loans; and if he will make a statement on the matter. [42242/14]
View answer348. Deputy Michelle Mulherin asked the Minister for Finance his views on the process followed by the National Asset Management Agency in respect of the sale of certain loans; and if he will make a statement on the matter. [42243/14]
View answerI propose to take Questions Nos. 346 to 348, inclusive, together.
Sales processes which are run by NAMA are a matter for the NAMA Board and it is not my normal practice to comment on them or on individual transactions. However, in this instance, I understand the sale was discussed at a recent meeting of the Oireachtas Joint Finance Committee and my understanding of the matter is based on NAMA's testimony to that Committee.
NAMA's policy is that the sale of all loans and the sale of properties by debtors and receivers should be openly marketed to ensure that the best price available in the market is achieved in all instances. NAMA enjoys a strong reputation in the market for the quality of information it provides as part of its open market loan sale process and for the transparent and professional manner in which such transactions have been completed to date. Its loan sales process is built on international best practice and it uses experienced advisers to ensure that transactions are executed to the highest market standards and that bidders are treated equally by mapping out a clear and rigorous process to be followed in each loan sale.
I understand that, in this instance, the rules and format of the bidding process and the fact that NAMA would consider only unconditional binding bids at the end of the Phase II due diligence were made clear to all bidders in the process. Mitigation of execution risk is standard industry practice in any loan sales process and to accept conditional bids, contingent on funding, would expose NAMA to accusations of being reckless and irresponsible with the interests of Irish taxpayers and would damage its credibility and, by extension, that of Ireland, internationally. It could also be exposed to complaints from underbidders who could reasonably contend that they were disadvantaged because they had faithfully abided by the rules which had been established at the outset.
There are substantial costs associated with the preparation and submission of bids on large transactions and any suggestion of unfairness or of a lack of professionalism in the process would be likely to alienate potential bidders. I am satisfied that if NAMA had not set out the ground rules for this loan sale with the utmost clarity and if, instead, it had left room for the inclusion of conditionality and ambiguity in the framing of bids, particularly around funding, it would have discouraged credible counterparties from participating in the process. It would also have left itself open to disputation as to what constituted the best price and ultimately would have risked losing value for Irish taxpayers.
The NAMA Chief Executive advised the Oireachtas Joint Finance Committee that the differential between the conditional bid and the successful bid was not material in the context of the price ultimately achieved. I understand that the differential was considerably outweighed by the execution risk that attached to the conditional bid and by potential negotiation over a warranty package and it would have been unacceptable for NAMA to put Irish taxpayers' interests at risk in such circumstances.
In the case of large loan and asset sales generally, compliant bidders cannot be expected to let their bids stand while a conditional bidder is allowed additional time to finalise an offer. The industry experience is that some bidders seek to use conditional offers to eliminate fully funded bidders from the process with the aim of ultimately seeking to reduce their own conditional bid.
I am not for a moment suggesting that this scenario applied in this particular instance. However, it is entirely understandable that NAMA would wish to preside over a sales process which was rigorous and professional in its execution and fair to all bidding parties. This was necessary not only to secure the integrity of this particular sale but also of any future NAMA loan sales. It is important for NAMA, and indeed more broadly for Ireland's reputation internationally, that sales processes such as this be conducted in a manner which is above reproach. I am satisfied that NAMA adhered faithfully to its own stringent process for assessing competing bids in this case and that it obtained the best price on offer to it having assessed the risks attaching to the bids received.
