Archive for June 3rd, 2010

Buried in yesterday’s Exchequer statement from the government is the fact that in May 2010, the government advanced NAMA €250m – this is in addition to the €49m for the NAMA SPV advanced earlier in the year. Why the need for such a large injection at this point? As NAMA doesn’t really do updates here are some speculative possibilities

1. The loans acquired by NAMA are performing even more poorly than previously disclosed (NAMA CEO said in April that 1/3rd were performing)  which means that NAMA must pay the interest on the NAMA bonds and subordinated debt but doesn’t have enough coming in from borrowers to defray the costs. Given that the NAMA bonds pay out 1% and NAMA were apparently to receive an average of 1%+2% premium from the developers, that would mean less than 1/3rd of the loans were performing.

2. NAMA is providing working capital to developers and isn’t yet able to issue NAMA bonds for the development pot – problems with the EU or lack of agreement of the Codes of Practice?

3. NAMA has some unexpected operating expenses. Given that NAMA has recharged hefty fees for enforcement and due diligence (indeed apparently making a profit of €25m on a minimum recharge contract), and given that the SPV has €49m of cash already plus €51m from third party investors, that’s hard to accept.

4. Construct a time machine to carry us back to 2005.

UPDATE: The Minister for Finance, Brian Lenihan, replied on Tuesday 1st June, to a question from Richard Bruton “The second [tranche of funding, the first was €49m for the SPV] was an advance of €250 million, which must be repaid to the Central Fund by 31 October 2010, to provide the Agency with a liquidity buffer to meet working capital demands pending the establishment of its own funding programme.” It is to be hoped that going cap in hand to the Department of Finance does not become a regular routine for NAMA as such a routine might eat away at NAMA’s celebrated independence.


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