Ireland orders probe into bad bank's Northern Ireland loan sale

* Government asks parliament to investigate

* State body says price of loan book was set to low

* 'Bad bank' NAMA 'categorically rejects' accusation

By Conor Humphries

DUBLIN, Sept 14 (Reuters) - Ireland (Other OTC: IRLD - news) 's government on Wednesday ordered parliament to investigate the sale by state-run "bad bank" NAMA of a multi-billion-pound portfolio of Northern Ireland loans after a state audit body said it set the minimum price too low.

The National Asset Management Agency (NAMA) said it "categorically rejected" that the loan book, dubbed Project Eagle, had been mis-priced.

Northern Ireland police in July opened a criminal inquiry into the sale by NAMA to U.S. private equity firm Cerberus Capital Management of the agency's Northern Ireland loan book for 1.32 billion pounds ($1.71 billion).

Ireland's Comptroller and Auditor General (C&AG) said in a report released on Wednesday that the 1.3 billion pound minimum price for soured loans with a par value of 4.5 billion pounds "involved a significant probable loss of value to the State of up to 190 million pounds".

The Irish government said the report raised "a number of important issues which the Government acknowledges will require further investigation" and said parliament's Public Accounts Committee should investigate.

Britain's National Crime Agency, the U.S. Department of Justice and a committee in Northern Ireland's regional parliament are already investigating the deal.

Cerberus has said that no improper or illegal fees were paid by it or on its behalf. NAMA has said it did nothing wrong and secured the best price it could for the assets.

NAMA said the C&AG was incorrect in assuming that NAMA should have applied the same 5.5 percent discount rate it typically used for assets in Dublin and London and was correct to apply a larger 10 percent discount rate for the "poor quality" Northern Ireland loans.

It said four specialist international firms had supported its assessment.

"It is clear to us that, if NAMA had retained the Eagle portfolio, there would be no investor interest in buying it today - or in the foreseeable future - at anything close to the 1.322 [billion pound] price that was actually achieved," NAMA Chairman Frank Daly said in a statement.

Set up to rid local banks of the risky loans left on their books, NAMA paid 32 billion euros - equivalent to 20 percent of Ireland's annual economic output - for 74 billion euros worth of loans.

One of the world's largest property groups, it plans to pay back its debts by 2018 and make a profit of at least 2.3 billion euros as it cashes in on a surge in demand for Irish real estate.

Inquiries into the deal were begun after an independent member of the Irish parliament, Mick Wallace, in July raised concerns about the Project Eagle portfolio, alleging that a 7 million-pound fee had been "earmarked" for a Northern Ireland politician. ($1 = 0.7591 pounds) (Reporting by Conor Humphries; editing by Ralph Boulton)