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Archive for November 1st, 2010

NAMA has published a Direction and one Statutory Instrument (SI), both issued to the agency by Minister for Finance, Brian Lenihan, in October, 2010. There is a link to a second SI but it is broken.

The Direction is that NAMA complete the transfer of loans as expeditiously as possible. The SI that is published – SI 505 Conferral of an additional function – oddly gives NAMA the right to acquire loans as expeditiously as possible. The far more interesting sounding “SI 504 NAMA determination of LEV of property and bank assets regulation” has a broken link and is not on the Attorney General’s site yet either. Requests have been made to several government departments and NAMA for a copy of this second SI.

It’s not clear why SIs were required but both the Direction and the SI probably give NAMA some legal cover for cutting due diligence and valuation corners with the remaining tranches. As there was no parliamentary oversight of the three legislative instruments we will need wait to see if the Minister volunteers information or the Opposition question the instruments to see if they serve other purposes. There will be an update here when the second SI becomes available.

We are expecting news on the completion of Anglo’s final tranche of €19bn of loans with an expected haircut of 67% later on.

UPDATE: The LEV SI has now been published on the NAMA.ie website. Although it is undated and unsigned, it is probably fair to say that NAMA is now operating it. Basically the SI allows NAMA to estimate based on a wide range of assumptions with a post-transfer review allowed. The relevant part is, I believe, “the data available to NAMA in respect of valuations already carried out by it with respect to market value or long-term economic value of the bank assets or class of bank assets already acquired from the particular institution or from other institutions (including data relating to the market value of the bank asset or class of bank asset or property or class of property);
(f) without prejudice to subparagraph (e), a percentage discount from book value represented by the acquisition value of eligible bank assets previously acquired from that institution;” This allows NAMA to use the discounts it provided the Minister in September and an adjustment can be made later on.

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There is a 47-page judgment and Paddy McKillen (and his applicant companies) have comprehensively lost on all five strands of the application:

(1) NAMA had failed to take into account relevant considerations such as the geographical spread of Paddy’s assets and the claim that the loans were all performing – the court ruled that any discretion to decline loans was NAMA’s discretion only

(2) NAMA failed to use “fair procedures” to acquire the loans – the court ruled that Paddy’s rights were not interfered with under NAMA’s procedures or if they were, the interference was “tangential”. This seems to be the point under which Paddy was deemed to have the best propect of success in pursuing but the court decided that ultimately he couldn’t succeed.

(3) NAMA’s decision on 11/14th December, 2009 to take over Paddy’s loans was before NAMA was created in law on 21st December, 2009 – the court held that NAMA subsequently adopted the prior decision

(4) The EU never intended unimpaired loans to be absorbed into NAMA – the court held that correspondence between FG Senator Eugene Regan and an EU official did not have authority in determining the intent of the EU and they further held that the EU decision approving the NAMA project in February 2010 did not preclude unimpaired loans from being acquired by NAMA.

(5) The NAMA project is unconstitutional – the court held that it was a proportionate response to the challenge facing the State. Although the court wasn’t concerned with the merits of NAMA, it held that the Act was not unconstitutional

An appeal application will be made by Paddy’s team on Friday next, 5th November, 2010 when the court will next consider sundry matters in this case including costs

There will be further comment and analysis here later on. The  Court Service has beaten me to getting a copy of the judgment online and it is available here.

The background and the most up to date news on this case is available here.

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