Irish Bad Bank Said to Plan Optional Debt Payout on Outlook

Ireland’s National Asset Management Agency, the nation’s bad bank, plans to make a first optional interest payment on its riskiest securities as the outlook for its commercial real-estate assets improves, according to a person with knowledge of the matter.

NAMA, based in Dublin, will pay the discretionary coupon on the 1.6 billion euros ($2.2 billion) of junior securities used as part payment to the nation’s banks for toxic real estate loans in 2010 next month, said the person, who asked not to be named as the details aren’t yet public. The agency’s 2013 profit will beat the 228 million euros posted in the prior year, said the person.

The junior debt payment “represents a major development in the history of the Irish property agency, illustrating its improved financial position and the confidence management has in its outlook,” said Ciaran Callaghan, an analyst with Dublin-based Merrion Capital.

NAMA bought 74 billion euros of loans from five lenders at a discount of 58 percent in 2010. About 95 percent of the payment was in senior NAMA bonds, with the rest in subordinated bonds. The junior securities will only be redeemed if the agency beats its target of repaying all its senior debt by 2020. NAMA has already repaid a quarter of its 30 billion euros of senior debt.

The interest payment on its junior debt suggests NAMA considers it may now beat its target of breaking even at senior debt level, Callaghan said. Ray Gordon, a spokesman for NAMA, declined to comment on the payment.

Allied Irish

Allied Irish Banks Plc, the nation’s second-largest lender, stands to be the biggest beneficiary of the payment, as it may be able to revalue its subordinated NAMA bonds, which were set at 10 cents in the euro in June, said the person. Bank of Ireland Plc, the country’s largest lender, valued the securities on its balance sheet at 44 percent of par.

The junior debt carries a 5.264 percent coupon, according to NAMA’s website.

Irish commercial real-estate values rose 0.3 percent in the third quarter, the first increase in six years, according to Investment Property Databank Ltd. Home prices also rose for the first time in six years in 2013, though are still 47 percent below their 2007 peak, according to the Central Statistics Office.

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