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Archive for March 24th, 2010

Aside from the cost of the review by the valuation panel which could run to 10s of €k, then no, there would appear to be very little downside and given the colossal sums involved a dispute might make good financial sense. So how will the dispute procedure work?

It’s all contained in Chapter 2 of the NAMA Act (section 119-127). In the following, I use EBS for example purposes only.

  1. EBS receives the Acquisition Schedule (AS).
  2. EBS has upto 14 days to raise a dispute with NAMA with respect to an asset valuation.
  3. NAMA, upon receipt of the dispute can decide to (a) remove the asset from the AS and continue on as normal (b) revoke the AS in its entirety and start again or (c) acquire the asset at the price in the AS and serve EBS with a Completion Notice (CN).
  4. Upon receipt of the CN under 3(c) and if EBS wishes to pursue the matter (why wouldn’t it?) then EBS must within 14 days of receipt of the CN raise a dispute in respect of the ENTIRE portfolio in the AS, not just an individual asset AND the individual asset dispute raised by EBS in 2 above must be greater than 12.5% of the total value of the portfolio.
  5. Upon receipt of the portfolio dispute notice from EBS, NAMA will pass the dispute to the Valuation Panel (VP) for review.
  6. EBS have upto 28 days from the date they receive the CN to pass all documentation to the VP that they wish considered as part of the review.
  7. NAMA have slightly more time to submit to the VP the documentation they want considered as part of the review – 28 days from when EBS notified them of the dispute under 4 above.
  8. The VP can make documentation from either side available to the other side.
  9. If either side, NAMA or EBS, wish to comment on the documentation received under 8 they will have 7 days in which to do so.
  10. The VP can request additional information from EBS or NAMA
  11. The VP have then upto 90 days (which can be extended by the Minister of Finance – “the Minister”) to make their determination TO THE MINISTER.
  12. The Minister has upto 28 days to either accept the VP’s valuation or he can send the matter back to the VP and tell them to reconsider. The VP can ignore the Minister and confirm the valuations as previously or they can modify their determination. The Minister gets one bite at this apple so if the second time round the VP comes up with the same valuation or indeed a different valuation then that is it.
  13. The Minister confirms what the VP have decided and if it is greater than the NAMA value then NAMA must compensate EBS for the difference. NAMA can choose to do that with a cash or cash equivalent OR NAMA can return an asset to the value of the difference.
  14. EBS picks up the cost of the entire review unless the VP comes up with a value which is higher than the NAMA value

Risks to EBS would include the cost of the review and the possibility of NAMA repaying the difference by way of an asset which EBS may not want. The VP would appear not to have an option of determining a value below that of NAMA so there is only upside for EBS in that respect. If an asset was worth €100m at origination and was granted a €77m loan (a 77% LTV) and NAMA valued the loan with a 40% haircut at €46.2m and EBS valued it with a 30% haircut at €53.9m, then would the cost of a VP act to prevent a dispute? I don’t think so and in these circumstances it would seem advantageous for EBS to lodge the dispute.

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