EU publishes its Decision approving NAMA, 2010 (N725/2009)

This is the link to the EU Decision which was announced on 26th February, 2010. The Decision itself was not made public at that point in order that it be censored for any confidential information. Today we have the Decision though we don’t know to what extent it has been redacted. The Decision is nearly 40 pages long and contains some interesting overview information of NAMA and its contextual setting in dealing with the Irish crisis. Comments and analysis will appear on here later today but in the meantime Emmet Oliver at the Independent has produced his own analysis of what is contained in the Decision.

Thus far the following appears to be of interest:

1. Rewards available to the private investors in the Master SPV appear to have been redacted (pages 7 and 8). The impression previously given was that private investors would be rewarded in line with government bond returns. The EU Decision describes a profit share arrangement and a further contingent equity bonus, both subject to maximums but the maximums have been redacted. Why?

2. Institutions of systemic importance are described on page 37 as having scored more than 60% on the following criteria ( I wonder how Anglo scored? The EU assures us on page 35 “Concerning the potential participation of Anglo Irish Bank in the Scheme, this participation will be assessed according to eligibility criteria for applicant
institutions which the Commission has found to be objective and non-discriminatory”)

i. Level of deposits in the State (1 is 0% market share, 10 is dominant market position);

ii. Number of retail depositors in the State (1 is 0 depositors, 10 is dominant market position);

iii. Number of customer accounts in the State (1 is 0 customer accounts, 10 is dominant market position);

iv.  Existence and scale of branch network in the State (1 is no branches, 10 is complete branch network);

v. Position in Irish mortgage market (1 is no market participation, 10 is dominant market position);

vi. Position in Irish SME lending market (1 is no market participation, 10 is dominant market position);

vii. Position in other business lending market (1 is no market participation, 10 is dominant market position);

viii. Position in Irish consumer lending (1 is no market participation, 10 is dominant market position);

ix. Number of borrowers in Ireland (1 is no lending function, 10 is dominant market position);

x. Role played in State’s payment system (1 is no role in payment system, 10 is control over State’s payment system)

3. NAMA sought powers to obtain information about individuals from the Revenue. Those powers seem to have been denied because they would have placed NAMA at a competitive advantage over other credit institutions (page 19).This aspect of the EU Decision will pique the interest of many observers.

4. Security offered by developers included “personal guarantees, art, share portfolios, wine collections; helicopters and life insurance policies.” (page 14, note 20)

5. Although the Commission didn’t think the NAMA scheme consideration for loans at around €54bn was worth of censoring, it did consider the value aggregate value of the assets to which the loans related were confidential. (Page 2). Strange, what could be confidential about the aggregate values of the property and given the estimate of average haircut (35%) is given elsewhere in the document, it’s not as if market moving capitalisation requirements were being suppressed.

6. Notwithstanding point 5 above the NAMA overall financial overview is set out on page 6 which shows that the property assets had a value of €94.2bn at origination, were secured on 77% LTV loans or €72.5bn which now have €10bn of roll-up interest and the assets are now worth €47bn, representing a 50% fall from the values at origination and given that not all loans were taken out at the peak and their “vintage breakdown” was not provided by Ireland, the assumption will be that values have dropped at more than 50% which is consistent with the Dail response by Brian Lenihan in November 2009 which was that €120bn was the value of NAMA loans assets at their peak value.

7. The planned scheduling of the tranches is shown on page 10 but there is an obvious mismatch between the cumulative book value of the loans at €77bn compared with €82.5bn elsewhere in the document.

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