Interesting information emerged in court about the terms of the bids to take over Treasury Holdings’ loans Nama wants to call in
AS TREASURY Holdings continues with its court efforts against Nama’s decision to call in its loans and appoint a receiver to its various assets, more detail has emerged on two of the bids Treasury has received to acquire some of its assets that are under the control of Nama and KBC Bank.
In January, Australian investment bank Macquarie Corporate and Asset Finance Ltd and real estate investor Hines both submitted bids for a property portfolio consisting of assets including PwC’s headquarters in Spencer Dock; the Central Park office development in Leopardstown; the Westin Hotel in Dublin’s city centre; as well as some development properties.
Both bids represented a premium on the €541 million Nama paid for the loans in November 2009 – although Hines’ offer is only marginally higher – and according to an economic assessment of the offer carried out on behalf of Treasury Holdings, both offers are in excess of the current value of the properties in the portfolio.
Macquarie’s offer, which was submitted on January 10th, proposed a total offer price of €622 million for the portfolio; €465 million of which was for investment loans and €157 million for development loans. Nama would get to keep €570 million, with the remainder going to KBC Bank.
According to the economic assessment, the offer represents a €127.3 million premium over the current net asset value (NAV) of the portfolio (€442.7m), and could represent a premium of €143.9 million if the projected gains predicted over the next seven years crystallise. With regards to the loan acquisition value, Macquarie’s offer represents a premium of €29 million, or €45.6 million, if the projected gains crystallise.
Macquarie’s offer centred on establishing two vehicles, the Investment Holding Company (IHC) and the Development Holding Company (DHC). Macquarie would own 100 per cent of IHC and 65 per cent of DHC, with Nama/KBC to own the remaining 35 per cent in equity and future profit interest in DHC.
Other elements of Macquarie’s offer includes an upfront payment by Macquarie of €73 million with the remaining €549 million coming from Nama/KBC corporate loan notes representing loan to value of 88.26 per cent; the corporate loan notes issued by Nama/KBC to be secured by a fixed charge over the assets – hence Nama/KBC would not lose control over these assets; a commitment from Macquarie to provide funding for future development to DHC to cover 100 per cent of construction costs and related professional fees; Nama to appoint one-third of the board of DHC; and Nama to benefit from 7.5 per cent of the profits realised from disposals in excess of €1.2 billion.
Under Macquarie’s deal, the management of the property portfolios would be outsourced to Treasury Holdings who would be incentivised with a warrant interest of 35 per cent in Macquarie’s shareholding in IHC, as well as a management fee.
On January 20th, Hines submitted its offer, which involved a more complicated structure. It involves an offer price of €544 million, €111 million of which will be funded upfront by Hines, and €442 million in debt finance from Nama/KBC. The total amount paid to Nama would be €500 million, with the remainder again going to KBC Bank.
According to the economic assessment, the offer from Hines represents a premium of €57.3 million over the current value of the portfolio, or a premium of €108.3 million if projected gains crystallise.
Based on the NAV, it represents a €41 million shortfall (or €10 million gain if gains crystallise).
Other elements of the Hines offer include a commitment to provide 20 per cent of development financing up to €18 million, on the basis that KBC/Nama provide financing for the remainder of 80 per cent or €72 million, which would have “the opportunity of offering uplift in value to all parties”.
There is further “potential uplift” to Nama/KBC through the holding of C-class shares of €44 million to €54 million.
Both potential investors indicated that they would be open to offering Nama the opportunity to co-invest equity with them on the same terms as they are investing.
However, to date, Nama has apparently refused to bite or engage on the aforementioned terms, arguing that neither proposal involved “investment” in Treasury but rather required it to provide the bulk of the finance for Macquarie and Hines to acquire the Nama loans.
Moreover, Nama asserted that the proposals were not in the interest of either Nama or the public but would benefit Treasury’s management and shareholders by about €80 million over a period of years, plus annual management fees of several million.
But there may yet be further developments. At last week’s court case, it was noted in the judgement that “there is undisputed evidence of continuing interest by Macquarie and Hines”.
