Emmet Oliver in today’s Irish Independent is claiming that the NAMA (Amendment) Bill which only three days in the Taoiseach’s resignation speech was highlighted as one of the two vital pieces of remaining legislation (alongside the Finance Bill) that needed be enacted before the dissolution of the current Dail, will not now be enacted in the current Dail. With a late February 2011 election expected and the merry dance that usually accompanies the post-election formation of a coalition (Ireland hasn’t had a one-party majority government since 1977-1981), it is likely to be late March or April 2011 that the Amendment will be enacted.
As regards the contents of the NAMA (Amendment) Bill, I am only aware of the Chief Whip’s announcements on 11th January 2011 which indicated that the Amendment was to enable NAMA to absorb sub-€20m exposures at AIB and Bank of Ireland. This looked odd to me as there is no mention of thresholds in the NAMA legislation (NAMA itself can absorb any eligible loans which are not defined by quantum, though it said in September 2009 that it would apply a minimum threshold of €5m to Anglo, AIB and BoI which was increased in September 2010 to €20m for AIB and BoI before being reduced to €0 for AIB and BoI after the IMF intervention in November 2010).
The suspicion on here was that the amendment was intended to significantly change NAMA’s remit, for example by forcing the agency to absorb other categories of lending (vanilla commercial property and mortgage lending perhaps which is excluded from NAMA’s remit which is primarily aimed at “land and development”). Interestingly the Independent today is now claiming that the delay with enacting the Amendment may jeopardise the banks’ recapitalisation plans.
UPDATE: 26th January, 2011. RTE is reporting that the NAMA (Amendment) Bill will be published later today. Whilst there is no time available in the present Dail session to agree this Bill, it is likely tol be a top priority for the incoming administration in March 2011 (on the basis that the Taoiseach said last Saturday during his resignation speech that alongside the Finance Bill, this NAMA amendment was a critical piece of legislation). The main changes, according to RTE, are:
(1) Change in the mix of NAMA consideration for loans. As presently constituted NAMA pays for loans using two instruments – (1) NAMA bonds which pay 1-2% interest per annum, the bonds comprise 95% of consideration and (2) subordinated debt bonds which pay the yield on the 10-year bond, presently 9% plus a premium of 0.75% however this subordinated debt is not honoured by NAMA in 2010 unless NAMA has broken even. One of NAMA’s great advantages, we were told, was that by holding back 5% of the consideration for the loans from the banks, we bought an insurance against NAMA making a loss. In practice if NAMA is paying out 10% per annum in interest on these subordinated debt bonds which constitute just 5% of consideration, then frankly the loss to the banks will be minimal over a 10 year period even if the bonds are not honoured by NAMA.
The proposed change is to change the mix of NAMA bonds and subordinated debt in NAMA’s consideration for loan exposures between €5-20m at AIB and BoI. RTE is saying the mix will now be 90.1%/9.9% bonds/subordinated debt.
(2) Provision for NAMA to absorb €5-20m loan exposures. As previously commented on here, this provision looks suspicious because similar provisions have not previously been needed to change thresholds which in any event are not referenced in NAMA legislation anyway.
UPDATE (2): 26th January, 2011. The Irish Times seems to add some more flesh to the bones of what is proposed for NAMA. It seems that the amendment with respect to sub-€20m loan exposures has less (if anything) to do with thresholds but more to do with the valuation method. What appears to be proposed is a batch valuation based on NAMA averages up to the point of acquisition. This would appear to be at odds with the EC approval given last February, 2010 so the amendment might need to go to Senor Almunia for approval.
UPDATE (3): 26th January, 2011. The Department of Finance has just published the NAMA (Amendment) Bill 2011. An initial glance shows that the Bill allows banks to decide within 15 days of the Amendment coming into force whether they wish to participate in the the transfer of lower value loans (<€20m) which will be valued according to the experience gleaned from larger loans and NAMA will pay for the loans using more subordinated debt than previously. NAMA is to p[ay for sub-€20m loans with 90.1% NAMA bonds and 9.9% subordinated debt which might not necessarily carry the same terms as the subordinated debt used to pay for larger loans. On the face of it these new provisions apply to all NAMA Participating Institutions (AIB, Anglo, BoI, INBS and EBS). There will be further analysis and comment once the Bill is studied in detail.
NAMA Wine Lake 
Is NAMA taking ALL loans under €20m or just loans from €5m to €20m?
111 E (b) “the amount outstanding on foot of the credit facility concerned (according to the books of the Part 6A participating 15 institution concerned) as at the date
determined for the Part 6A participating institution under section 111D is €20,000,000 or less.”
So €0-20m. There is no mention of a 5m threshold or AIB or BoI so I guess AIB, Anglo, BoI’s €0-20m are being transferred. These new provisions apply to all five NAMA Participating Institutions with eligible loans below €20m.
The greatest concern so far is that haircuts that were worked out individually for higher value loans with more associated (good quality) assets will now apply to fields in Athlone and there doesn’t appear to be any ex post individual valuation. Not sure how this stacks up with the EU approval in Feb 2010.
Hmm. The NAMA legislation was deemed not to be a “Money Bill” in its original outing but since AIB, for example, will shortly become nationalised (and therefore dealing with public money) then surely NAMA Mk2 needs to be referred to the President / Council of Privileges?
Keep up the good work.
Article 22
1. 1° A Money Bill means a Bill which contains only provisions dealing with all or any of the following matters, namely, the imposition, repeal, remission, alteration or regulation of taxation; the imposition for the payment of debt or other financial purposes of charges on public moneys or the variation or repeal of any such charges; supply; the appropriation, receipt, custody, issue or audit of accounts of public money; the raising or guarantee of any loan or the repayment thereof; matters subordinate and incidental to these matters or any of them.