The US company that bought the controversial Project Eagle loans from State agency Nama for €1.6 billion could make several hundred million euro profit on the transaction, according to some sources.
New York-based Cerberus Capital Management's £1.2 billion (€1.6 billion) purchase of the loans is caught in a row over claims that a number of Belfast political and business figures were to receive payments as a result of the deal. The company itself denies any connection with any wrongdoing.
Cerberus recently wrote to a Northern Ireland Assembly committee, which is investigating the claims, giving figures implying that it expected a return of around £1.4 billion for its initial £1.2 billion outlay This means it is looking at a £200 million profit, before deducting its expenses.
However, some sources have said Cerberus can ultimately expect to make far more than this on the basis that the US investment company looks for returns of around 15 per cent to 20 per cent a year from its European property investments.
Depending on the actual rate and the number of years that it holds the loans – and the properties against which they are secured – it could ultimately generate returns of up to £500 million on its investment, around €680 million.
Cerberus has said that it borrowed 65 per cent of the purchase price – £800 million – and paid the remaining £400 million from its own resources. This mix of debt and equity is typical of the approach taken by such investment funds.
Accounts for Promontoria Eagle, the Irish-registered company that it used to buy the portfolio, are not yet publicly available. However, the indications are that it is likely to have raised enough cash from Project Eagle already to cover a significant part of the £800 million it borrowed to fund the purchase.
A number of the bigger borrowers in the portfolio, including Paddy Kearney's Kilmona, Noel Murphy's MAR Properties and the Lagan brothers' Lagan Developments, paid off Cerberus and refinanced their liabilities with another US firm, Jefferies Loancore, in July and August. Kilmona refinanced its loans for £122 million.
This is a key part of Cerberus’s approach. It gives borrowers a list of other lenders willing to refinance their debts. This allows it to sell on a large part of the loans it acquires within a relatively short time. That in turn means it recoups a significant portion of its outlay quickly.
Figures published by another one of its Irish companies, Promontoria Thames, that it has used to buy property loans from a number of British banks, show that it paid off a £90 million loan from Nomura Bank, which it used to purchase those assets, last November, 18 months before it fell due. Its companies here structure their operations so that they pay minimal corporation tax.
A spokesman for Cerberus said at the weekend that it has reached agreements with businesses responsible for 96 per cent of the £4.3 billion in unpaid debts that made up Project Eagle. He pointed out that many of those deals will require it to remain as a “longer-term” lender and investor as those borrowers repay their restructured loans.
