Archive for July 1st, 2010

NAMA has at last published the guidance it gives NAMA borrowers (referred to as debtors) and the Excel datapack (effectively a business plan template) in respect of what are commonly called the Developer Business Plans. A commentary will appear here shortly.

There is the Business Plan Requirements (BPR) document which has a Guidance Note on the last page. Reference is made in the BPR to guidance notes (plural) – is there another document? There is also set of spreadsheets on Excel which are referred to as the Datapack and are intended to provide the financial information.

The developers are not called borrowers or even project facilitators – they are debtors.

NAMA is smart and requires information by reference to the Ultimate Beneficial Owner, a term it has borrowed from anti-money laundering legislation and which according to the BPR “It is therefore intended to look through trusts, trustees, fund structures, joint ventures, partnerships, connected and related parties and similar, to identify the ultimate controlling beneficiary(ies).”

The debtors are required to conclude if their babies are to be completed, held or sold.

The Business Plan horizon is 3 years out to 2012 and uses quarters as the appropriate period within the horizon.

The BPR requires a description of “current and expected management involvement including management incentivisation”

The BPR requires a base case and stress-testing of that base case.

The BPR requires details of current holding costs including details of lapsed insurance policies.

The extent of current creditor pressure is required and if you were a non-NAMA financial institution creditor, now might be the time to dial up the pressure.

Interestingly the business plan doesn’t appear to require a list of the assets available to the debtor eg yachts, helicopters, fine wine collections. Although there is space for entering director compensation on the financial statements it is unclear where profit sharing arrangements might feature.

It is still unclear why a reported NAMA Top 10 Debtor like Derek Quinlan will have had his personal loans transferred in tranche 1 but the loans relating to his shareholding in Maybourne (Coroin is the holding company for this hotel group which owns Claridges, the Connaught and the Berkeley in London) are apparently being considered for future tranches.

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Figures released yesterday to the Irish Examiner by Hubert Kearns, chairman of the “project agency” responsible for collecting the non principal private residence tax (NPPR is €200 per dwelling per annum) show that private rental property in Ireland is owned by a large base of landlords.

Some 135,300 landlords own some 330,000 properties which have paid a total of €64.3m in NPPR tax for 2009. It has been estimated that there has been 80% compliance in paying the tax.

Whilst many people with one non principal private residence may be owners of holiday homes, those with 2-10 non principal properties number 35,000. One possible effect of such a wide landlord base might be difficulties in setting prices which have come under pressure from supply:demand issues and rising interest rates (indeed Permanent TSB is launching a campaign to drive up the cost of tracker mortgages for investor buyers).

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Where is the NAMA Business Plan?

When talking about the NAMA Business Plan the Minister for Finance has been careful to avoid giving any impression that the Department of Finance has any approval powers, the impression given to date is that NAMA would, almost as a matter of protocol, provide the Department of Finance with an advance copy of the Business Plan and then it would be published in its unadulterated form. The NAMA CEO, Brendan McDonagh, refused to elaborate on the content of the Business Plan when he appeared before the Oireachtas Joint Committee on Finance and the Public Service in April 2010 (much to the frustration to deputies and senators questioning him). He said the plan was being worked on and would need to be approved by the Board of NAMA and would then be forwarded to the Department of Finance (no mention was made of “approval” at the DoF) – he said “the revised business plan must be approved by the NAMA board before being submitted to the Minister. Once submitted to the Minister, it will be published and be in the public domain”. The Minister for Finance, Brian Lenihan, as recently as last week has never mentioned any approval process at the DoF – “On NAMA, Mr Lenihan said the state agency’s first quarterly report was due to be submitted to him next week. An updated business plan from the board of NAMA is due to be submitted to the minister by June 30. Mr Lenihan committed to publishing both documents.” If NAMA has submitted the Business Plan then why is it not available from the NAMA website?

Emmet Oliver has an article in today’s Independent with the headline “NAMA forced to change its business plan” – his article makes no reference whatsoever to any event that might justify the use of the word “forced” and readers are left with hanging questions – forced by whom? Under what circumstances? Why? Could the “forced” refer to NAMA itself being forced to change assumptions from the October 2009 draft Business Plan as a result of experience with the first tranches and dealing with the project for an additional 10 months? “Forced” carries some provocative interpretations and on reflection, I don’t think Emmet Oliver would be very happy with this article of his. He goes on to say that new Business Plan assumptions were submitted yesterday, again without citing sources. He says that the loan default rate of 20% is “set to rise” and “If the default rate rises to 30pc the agency will be unable to meet its promise of returning €4.8bn to the taxpayer when the agency winds up in 2020” – the default rate is the ying and the assumption about future property price increases is the yang – if one has reduced but the other has increased then the position might remain the same.  Lastly Emmet Oliver is wrong when he talks about the necessity to include NAMA conflicts of interest (“if it thinks they are serious enough”) in the Quarterly Report – section 30(2) of the NAMA Act makes any inclusion of any conflict of interest in the Quarterly Report discretionary on NAMA’s part (the mandatory part of section 30(2) is that NAMA must record the conflict internally)

His article does cite a NAMA spokesman who would only confirm that a Business Plan has been submitted. No date is given for the date of submission of the Business Plan by the spokesman.

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