October 12, 2017 / 11:01 PM / 2 years ago

Irish "bad bank" pays off last of senior debt

DUBLIN, Oct 13 (Reuters) - The “bad bank” set up almost a decade ago to mop up toxic assets in Ireland’s financial system marked a milestone on Friday by redeeming the final tranche of government-guaranteed senior debt three years ahead of schedule.

Established in 2009, the National Asset Management Agency paid 32 billion euros ($38 billion) to purge Irish banks of 74 billion euros of risky loans, after a property crash left them near collapse and pushed the country into a three-year international bailout.

Seen as a major liability for Dublin’s finances when it began operating towards the end of a crash that cut property values in half, NAMA has since ridden a surge in demand for Irish real estate and expects to hand a 3 billion-euro profit to the state.

“Today we have delivered on NAMA’s core objective – an objective many people thought unachievable at the outset,” NAMA Chairman Frank Daly said in a statement.

“Since inception, the NAMA board, mindful of the wider impact on the financial standing of Ireland, has unwaveringly focused on eliminating this senior debt.”

Friday’s 500 million-euro redemption completed the repayment of the agency 30.2 billion euros of senior debt. The agency said it expects to redeem its remaining 1.6 billion of subordinated debt by the first call date, in March 2020.

The agency, which started out as one of the world’s largest property groups, sold most of its portfolio to large, mainly U.S. private equity firms like Cerberus Capital Management and Lone Star, helping restore investor confidence in Ireland.

It has courted controversy along the way, too. Northern Ireland police last year opened a criminal inquiry into the 1.32 billion-pound sale of NAMA’s Northern Ireland loan book to Cerberus in 2014.

NAMA and Cerberus have said they did nothing wrong.

It still has almost 4 billion euros of loans to work out and was also given additional roles by the government, including building 20,000 homes on land it controls and building a new business district dubbed the “Canary Wharf of Dublin”.

The government this week said some NAMA staff, whose numbers have been declining in line with its portfolio, would assist in the operation of a new body that will offer debt finance to builders and help alleviate a chronic under-supply of housing .

“While one job is done, we will continue to progress (these) programmes,” Daly said. ($1 = 0.8444 euros) (Editing by Larry King)

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