Archive for June 6th, 2010

With banks clinging onto the valuation of loans in their balance sheets and terrified of crystallising losses, the Independent today reports that “the Housing Finance Agency [state-owned quango] at one stage claimed that financial institutions had admitted they were using “Nama as a reason for inertia, although obviously only making this admission on an off-the-record basis”.”

Off the record or not, banking behaviour has aroused the curiousity of those who wonder about the very low level of home repossessions, the “obstructionism” of banks in leasing developments for long term social housing and the refusal of banks to sell property even when the sale has the support of the developer – all this when most short-term forecasts see property dropping another 10-50% (S&P, Moody’s, DKM, Brian Lucey, David McWilliams, Morgan Kelly).

Although NAMA Chairman, Frank Daly’s call to the auditing profession on Friday last to exercise better judgement when examiing client financial statements and to expand their considerations to business strategy,  was immediately  met with the hackneyed “we audit to international standards” I wonder whether the 2010 financial statements will be considered with a more judicious eye by the auditing profession.


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In short and despite their significance they are anonymous. Their fronts have been identified but the identities of “the beneficial owners” have not been revealed. And whilst there was speculation as to the financial terms, the final EU Decision redacted those terms. NAMA did reveal details in the June 2010 Business Plan (see bottom of this entry and page 15 of the Business Plan).  This entry examines the limited information we do have..

On 28th April, 2010, Minister for Finance, Brian Lenihan confirmed the identities of what he termed the three NAMA SPV investors, each of whom having invested €17m (to give a total of €51m which together with the government investment of €49m gives NAMA a capital base of  €100m). The full text and context of the response is here.

“The NAMA SPV structure has a subscribed capital of €100m. As explained to the Dail at the time of the legislation, and subsequently agreed with the EU, 49% of this capital was advanced by NAMA and 51% by private investors. Three private investors, namely, Irish Life Investment Managers, New Ireland Assurance and a group of clients of Allied Irish Banks Investment Managers, have each invested €17m in the vehicle. It is important to note that in each case the beneficial owners of the investment are pension funds or other clients of these investment companies and not the parent credit institution.”

There following are the three “investors”:

1. Irish Life Investment Managers “the asset management arm of Irish Life & Permanent plc. ILIM manages money on behalf of a wide range of clients from large multinational corporations, charities and domestic companies. Currently managing assets of in excess of €30bn”

2. New Ireland Assurance “As part of the Bank of Ireland Group, New Ireland is backed by the Group’s resources and expertise. New Ireland is one of the leading life assurance companies in Ireland, providing for the future of hundreds of thousands of customers with easy to understand life assurance, pension, savings and investment products.”

3. “group of clients” of Allied Irish Banks Investment Managers “is an autonomous, independently managed investment manager.  We specialise in the provision of discretionary investment management on behalf of a diverse client base.  AIBIM has been managing investment portfolios in Ireland, the U.S., Europe and Asia since 1966.”

Let’s also recap the rewards on offer to the above “investors” (whoever they might be) according to RTE last October 2009 : “The private investors, along with NAMA, will receive an annual dividend linked to the performance of the Master SPV. According to a briefing note issued to TDs today, this will be capped at the 10-year Irish Government bond yield at the time the dividend is declared.  When the SPV is wound up, the investors will be re-paid their capital only if the Master SPV has the resources. They will receive a further bonus of 10% if the Master SPV makes a profit. NAMA representatives will have a veto over decisions which could affect the interests of the Government or NAMA.” Also if NAMA makes a loss then that loss erodes the capital base and reduces the original investment.

According to the EU Decision in February 2010.

1. “The Master SPV will have its own Board, with members appointed by NAMA and the private investors. However, since the State (Minister for Finance) is guaranteeing the majority of the securities (equivalent to 95% of the purchase price consideration) issued by the Master SPV, NAMA representatives on the Board will maintain a veto over all decisions of the Board that could affect the interests of NAMA or of the Irish government.”

2. “The Master SPV will be run with the objective of making a profit on the purchase and management of the assets. The profits earned by the SPV will be distributed to the shareholders according to the following arrangement, which reflects the fact that the debt issued by the Master SPV will be guaranteed by the Irish Government:

(i). The equity investors (NAMA and private investors) will be entitled to receive an annual dividend linked to the performance and profitability (taking account of all direct and indirect costs) of the Master SPV, capped at […].

(ii). Upon the winding-up of the Master SPV, the equity investors (NAMA and private investors) will only be repaid their capital if the Master SPV has the resources. The private investors will receive a further equity bonus of maximum […] of the capital (capped at EUR […]) if the Master SPV makes a profit.

(iii). All other profits and gains of the Master SPV will accrue to NAMA”

The “[…]”s represent redactions for confidentiality reasons.

3. “If the Master SPV makes a loss in its lifetime or is wound-up, the equity invested in the majority private-sector owned Master SPV and any associated dividends will be lost.”

So it would appear the final terms of the private-sector SPV investment are secret but are subject to caps. The identities of the beneficial owners of the private-sector SPV investment are secret and the MfF’s response above about the front companies should only have satisfied a child’s question.

The NAMA SPV is a good example of doublethink. Whilst it is officially a company owned by the private sector that operates independently of the government so that the funding of its purchases will not be added to national debt, in reality the government controls 100% its actions. Knowing the identities of the investors and the financial terms would probably just crystallize the sleaze of this EU-coordinated device and would not advance the work of NAMA.

UPDATE: July 17th, 2010. The NAMA Quarterly Accounts for the period ending 31st March 2010 reveal that most of the €100m investment (€49m government, €51m private investors) has been lent to the NAMA SPV at an annual interest rate currently set at 4%.

UPDATE: 7th October, 2010. NAMA has in fact stated in the June 2010 Business Plan (Page 15) “In order to achieve its objectives, NAMA established a special purpose vehicle (SPV), National Asset Management Limited, which is responsible for the purchase, management and disposal of loan assets from participating institutions and financing such purchases through the issuance of debt securities. The SPV is owned jointly by private investors (51%) and NAMA (49%) through an investment holding company, National Asset Management Agency Investment Limited. NAMA maintains a veto over all activities of the SPVs. The annual return to the private investors is capped as it is linked to the Irish Government 10 year bond yield at the time it is declared with the potential upside of 10% of capital invested to be paid at maturity if NAMA meets its objectives. All other profits and losses accrue to NAMA.”


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