NAMA has already paid 4 of the 5 participating financial institutions €3.5bn approx of consideration in respect of the first tranche of loans. The payment has comprised 95% NAMA Senior Notes (€3.3bn approx) and the remaining 5% is in Subordinated Bonds (€0.2bn approx).
The summary terms for the Senior Notes are set out by NAMA here. The summary terms for the Subordinated Bonds are set out by NAMA here. In brief, the Senior Notes will be paying out interest at the 6 month EURIBOR rate (currently in April 2010 set at 1%) in September and March. The Senior Notes can be redeemed at the ECB and indeed it was hoped that the financial institutions would do just that and make the resulting cash available for lending to homes and businesses.
The Subordinated Bonds are more complicated. Firstly the interest rate payable by NAMA is set as “10 year Irish Government Bond rate as at the first Issue Date plus 75 basis points”. The 10 year Irish Government Bond rate is in March/April 2010 was/is 4.5-5%. That is a considerable difference to the Senior Notes – using an example of the maximum of €2.7bn of Subordinated Bonds allowed by the NAMA Act, over a 10 year period the difference between a 1% ECB interest rate on Senior Notes and a 5.25% 10-year + 75 basis points rate is nearly €1.25bn. To express it another way NAMA will pay 22% of its interest payable bill on Subordinated Debts which account for 5% of its consideration to the financial institutions. Secondly these bonds are only redeemable in March 2020 in accordance with the financial performance of NAMA as set out in the NAMA Act.