Archive for June 4th, 2010

There must be days when Frank Daly wonders if the €170,000 annual income he gets for chairing NAMA is worth the grief and aggravation. His speech to the Association of Compliance Officers in Ireland last week hogged the headlines for his statement which seemed to imply that NAMA would pursue developers for their written-down loan values and would call off the chase once NAMA had recouped what it had spent. In what was the late journalist, Alan Ruddock’s, last published article NAMA received a broadside with accusations of bailouts for developers. However it appears that Mr Daly’s comments were misinterpreted and that NAMA are not backing away from their original objectives after all. He told the Certified Public Accountants Annual Conference today “There has been some comment that the consequence of this objective is that NAMA, having recovered its outlay, will then absolve borrowers of their further obligations. This is absolutely not the case. Borrowers, as both I and NAMA’s CEO Brendan McDonagh have already said on a number of occasions, will continue to be liable for the debts that they have incurred.” The speech might also be remembered for sandwiching a call to auditors to step up to the plate and examine more closely business strategy and ethics of companies audited, betwixt the opening pleasantries and concluding encomium to the beauty of Boyne bridge.

So a storm in a teacup it would appear. Mr Daly on the other hand will need to get used to dealing with tougher questions and perhaps he should consider, in his role of Chairman of NAMA, whether it might be advantageous to the whole project if he were to lobby the DoF to have NAMA brought within the remit of the Freedom of Information. As previously explained, this would not mean that NAMA had to disclose commercially sensitive information (much as the DoF doesn’t when responding to FoI requests) but it would deflect mounting criticism and suspicion about the NAMA project. It might also require a few extra staff but in the context of a €50bn operation, the cost of employing a few more heads might well be a price worth paying.

NAMA might consider weighing up the cost of alienating the public, Opposition parties (who might not be in opposition for the next 10 years) and international interests including foreign administrations with the cost of a miniscule increase in overhead and a process of dealing with access requests which has not de-stabilised the Department of Finance for example.


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The May exchequer statement revealed that NAMA had been given €250m during the month of May 2010. As reported here the Minister for Finance, Brian Lenihan, in response to a question in the Oireachtas from Richard Bruton said that the €250m was an “advance” repayable by October 2010 to provide a working capital buffer until NAMA has established its own funding programme (presumably how it will use the €5bn development pot and manage any third party investment).

A few questions arise.

  1. Is an advance the same as a loan? You would have thought so but then why didn’t the MfF use the term “loan”?
  2. What are the financial terms of the advance? Given that NAMA is an independent body, presumably it will pay interest on any advance or risk allegations of unfair State aid?
  3. What documentation or Business Plan did NAMA present to the DoF to get the advance? Was NAMA required by the DoF to re-submit documentation or alter its request?
  4. What analysis and consideration of the request took place at the DoF? Was the original request granted in full or were amendments suggested?

It is over-egging the pudding to claim this advance completely undermines NAMA’s independence though one principle of the successful Swedish Securum scheme as outlined to an Oireachtas committee was the need to ensure an asset management company has sufficient funding from the outset to prevent the risk of political interference in what are supposed to be commercial decisions later on. Frank Daly, the NAMA Chairman who has enjoyed a long and distinguished career at the Revenue, and NAMA CEO Brendan McDonagh, a relative newcomer but to date attracting widespread praise (though it has to be said based on limited actual results at NAMA) enjoy solid reputations and for all the political slings and arrows cast at Brian Lenihan, I think he is a decent man grappling with a nightmare crisis. All that said, though, what would be the worst that could have happened with the DoF provision of the advance?

  1. The DoF stipulated that working capital was not to be provided to non-FF-supporting developers
  2. The DoF stipulated that working capital was not to be provided to non-FF constituencies.
  3. The DoF required NAMA to employ, or provide contracts to, friends and relatives of FF members

The above would be tantamount to gross corruption and I would suggest near-impossible (but these are the fantasy scenarios you get when NAMA has to come with the begging bowl to the government) but consider the following:

It has been reported, for example by the well-informed Simon Carswell at the Irish Times, that loans relating to the Irish Glass Bottle (IGB) site at Ringsend, in which the state-owned Dublin Docklands Development Authority (DDDA) “invested” (“speculated” according to some), have been transferred to NAMA. NAMA don’t confirm borrowers’ identities and accord borrowers the same degree of confidentiality they would have enjoyed at their original financial institution so the following is based on the assumption that the reporting of the IGB loans is accurate. The DDDA is reported to have written the value of its investment down to zero in its accounts and is also reported to be servicing a loan to the tune of €5m interest per annum – a nightmare ongoing situation. One can see why dealing with this site might be a priority for the government – to dig the DDDA out of its past mistake/lunacy. But should it be a priority for NAMA? Some have argued that NAMA can’t prioritise its spending until it has taken over 100% of the loans – after all until a project is examined in some detail how can you say that it doesn’t offer a better return than others? Whilst there is no suggestion of wrong-doing on the part of NAMA’s Head of Portfolio Management, John Mulcahy and NAMA claim to have robust conflict of interest procedures in place, I do remember that Jones Lang Lasalle was John Mulcahy’s former employer and JLL were the main property company advising the former owners of the IGB site.

Although we have gotten used in recent times to discussing the crisis facing the State in terms of billions, €250m is still a very considerable sum of money. When added to the €49m State investment in the SPV and the €51m from third party investors and possibly a €25m profit on NAMA’s incurring of due diligence expenses plus cash flow from 1/3rd of the NAMA loans that are supposed to be performing, NAMA would now appear to be in a position to wield major influence on property development in the State.

And yet we have no Codes of Practice, no Business Plan and the government insists on excluding NAMA from the Freedom of Information provisions. Worrying and with the potential to undermine confidence in the NAMA project.

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According to today’s Irish Times, this is what developer and perhaps NAMA-bound “project facilitator”, Paddy Kelly has said which if true would blast out of the water NAMA’s “prudent” assumption that only 20% of developers would default on their loans. Development land, NAMA’s principal stock in trade has collapsed in value in the State in a spectacular manner, the Irish Glass Bottle site (written down from €416-426m to €60m) and that field in Athlone being two key examples.

If there is widespread default by NAMA borrowers then NAMA will have to rely on an improvement in the property market as it inevitably forecloses on large numbers of assets. As reported earlier this week, NAMA will face a far more challenging task than imagined last October in its draft Business Plan.

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The Project Facilitators

As NAMA calls them or the developers to you and me. Although NAMA has not confirmed the identities of any of its “clients” it has said that it will uphold the same standards of confidentiality as the financial institutions from which the loans are being transferred. That said, Simon Carswell at the Irish Times appears to be confident about the identities, having claimed in February 2010 that the Irish Times had established the names of the top borrowers being moved in the first wave of transfers.

Today the Irish Times speculates (ie doesn’t claim to know for a fact) about the next wave of developers to be transferred to NAMA. And to make matters clearer, NAMAwinelake today presents an exclusive spreadsheet of the supposed NAMA-bound developers. The spreadsheet will be frequently updated and will be available on the Tranches tab above. The associated companies and individuals include present and past associations, eg Derek Quinlan has resigned from Avestus, formerly Quinlan Private and the associated assets include present and past assets. This is what the spreadsheet looks like Saturday, 5th June, 2010.

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