Shaking that asset

For law firms on both sides of the Irish Sea, the latest phase of the The National Asset Management Agency process presents the most significant opportunity yet. By Tom Phillips

The national Asset Management Agency (NAMA), the government agency designed to stabilise the nation’s banks by taking property loans off the banks’ books, is now acting as Ireland’s most important bank manager.

For Ireland’s people NAMA’s latest phase represents the ­official start of a worrying process to save its ­economy. For law firms on both sides of the Irish Sea it is one of the hottest tickets of the year.

“Law firms would regard this as a very significant source of work over the next 24 months,” says Andrew Muckian, head of property at William Fry. “In terms of levels, this phase of NAMA is a step up.”

The paper value of the loans taken from banks is valued at e77bn (£63bn), but NAMA has paid around e54bn.

The agency is proof that we live in interesting times. Rather than building on its ­investment, NAMA now has the task of turning Europe’s – possibly the world’s – largest property ­portfolio into the smallest, with a mandate of 10 years to rid itself of the assets and pay off its huge bill.

The loans come from the country’s five biggest banks: AIB (e24bn), Bank of Ireland (e16bn), Anglo Irish Bank (e28bn), EBS (e1bn) and Irish Nationwide (e8bn).

NAMA has now taken the place of these banks and become the lender, with a loan book bigger than all the country’s banks put together. Interestingly, some e18bn of the loans relate to property in the UK, including Battesea Power Station and parts of Canary Wharf.

For Ireland’s law firms, which have already picked up work from the first ­phases of the NAMA process, the next stage is the most important yet. And by 30 April,
all firms that were not conflicted (the ­property aspect of the assets made it ­difficult for some) had submitted tenders to be on the panel for the enforcement and restructuring of the loans.

The breadth of work needed, involving insolvency, litigation, banking and ­conveyancing, means the big five are likely to pick up the biggest mandates. Previous involvement with NAMA will undoubtedly be a bonus. But UK firms have also ­tendered, recognising the potential of this latest NAMA phase.

“Prior to now NAMA hadn’t had assets transferred to it,” says McCann Fitzgerald chairman John Cronin. “It’s new to this exercise, so it could need a lot of assistance.”
The size of the panel is unknown, but with many firms vying for a place, the fees are likely to be competitive. As a public body, NAMA will also have to show it is getting value for money.

With this in mind, why are firms so keen? There are a number of reasons. The work will be extensive and, as NAMA is a ­statutory body, it has to be secure – something of a boon at a time when chasing clients for payment has become an art form for Irish law firms.

The work is also likely to be innovative, involving genuinely groundbreaking schemes to unravel the unprecedented mess in which some of the debtors have found themselves.

“It has wider implications – the successful restructuring of these loans will mean an uptick in the property market and significance for the wider economy,” says Muckian.

“A lot of these loans will need to be restructured. Many loans are coming to the end of their terms and would have to be ­refinanced or extended in any case. Also, a lot of the developments are uncompleted and the loans would have to be ­restructured for that to progress.

“The enforcement side will be more ­limited and will only arise if there isn’t a viable business model or any hope of the loans being repaid.”

Hugh Beattie, partner and head of McCann Fitzgerald’s London office, says the agency will want a large pool of law firms to choose from, matching the size and complexity of the loans.

The UK property, he adds, is a particular cherry on the cake.

cherry on the cake.

“Unlike in Ireland, where there is a diverse range of property, the UK aspects are quite landmark and will get sold quickly,” says Beattie. “This makes it very attractive.”

A senior lawyer at a top three firm confirms that a “number of Magic Circle firms” have submitted tenders.

“It’s a very important phase,” says the partner. “This work will go on for a long period and involve many different kinds of work.”

NAMA remains tight-lipped about when the panel will be announced. Until it does, many lawyers in Dublin and London will have their fingers crossed.