Archive for August 2nd, 2011

The sometimes bohemian Minister for Finance and Personnel in the Northern Ireland Assembly, Sammy Wilson, today penned an opinion piece for the Belfast Telegraph on the subject of NAMA.

Referring to previous talks with the then-Minister for Finance, the late Brian Lenihan, Sammy recalls assurances given to him that there would be no fire sales of NAMA-controlled property in Northern Ireland. Since there is no real definition of the term “fire sale”, it seems NAMA will have to proceed with disposals inNorthern Ireland with caution, lest the agency breaks a solemn commitment.

Sammy raises an issue that seems to go unnoticed by politicians on this side of the border, the delays at NAMA in approving business plans. Remember that as of one month ago, the NAMA chairman Frank Daly told RTE that just one developer business plan was “close to finality” in terms of its full agreement; this   15 months after the first tranche of loans was acquired by the agency.

With an eye on NAMA’s €5bn development fund, Sammy calls for NAMA-controlled assets in Northern Irelandto be used or developed where possible. It’s funny that there hasn’t been any similar call from politicians on this side of the border, not even when NAMA redeemed €750m of its bonds which cost NAMA (and by extension the rest of us) just 1.5% per annum. What sort of stimulus might our economy have seen if the cash used to redeem this cheap loan from the ECB had been used instead for developing much-needed schools or care centres?

Lastly Sammy calls for Northern Ireland to have what he terms a “full representative” on the NAMA board which is a little puzzling; Peter Stewart (pictured here) is known to be the Northern Ireland representative member on the NAMA board and of course NAMA also has a committee, the Northern Ireland Advisory Committee, which includes Peter Stewart and an additional two stalwarts from Northern Ireland’s establishment, NAMA external board members, Frank Cushnahan (pictured here) and Brian Rowntree (pictured here). For a NAMA market which represents just 5% of the total NAMA portfolio, you might say thatNorthern Ireland has already sapped a disproportionate amount of NAMA managerial resource.

But for all of Sammy’s demands, consider this : a senior politician calling for NAMA to get its finger out with agreeing developer business plans and calling for capital funding for the development and use of assets – wouldn’t it be just splendid if we had such politicians on this side of the border?


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Much of what was reported by NAMA in its annual report for 2010 was covered in some detail on here when the Q4, 2010 report and accounts were published in May 2011. The most significant aspect of the report, the €1.1bn net loss for the year, was covered on here last week. There is little new information contained in the annual report and in fact there continues to be a shocking lack of transparency in NAMA’s operation with very little information on disposals of property/loans or new advances to developers. Surely an asset management company could have provided at least a couple of case studies in the successful disposal of a property or a development in receipt of additional lending. There may have been confidentiality issues but surely one developer could be found to waive a very low level of confidentiality.

So the following is a broad range of snippets.

(1) NAMA’s approved sales. Having managed sales people in the past, I have a very keen sense of what constitutes a sale and the following don’t count in my book : offering something for sale, demonstrating a product even if the audience response is positive, a vague commitment given over a pint or even delivery of a product. In my book a sale arises when a buyer has unconditionally agreed to buy and even then, you mightn’t book the full sales price. It is unclear what NAMA’s “approved sales” – €1.9bn in 2010 and a further €2bn to the end of June 2011 giving a cumulative total of €3.9bn – represent. What we can say with certainty is that NAMA was only able to book €363m in 2010 from the “proceeds from the sale of collateral as security against loans and receivables”. Indeed it’s not totally clear if that €363m might be exposed to downward revision if it contains an accrual element. So on one hand you have NAMA trumpeting “approved sales” of €1.9bn in 2010 and on the other you have the reality of a more modest €363m actually booked.

(2) NAMA’s new advances to developers. Again you have a disconnect between what NAMA calls the approval of advances which total €900m to the end of June 2011 (€750m to the end of December 2010) but which the December 2010 accounts show as “new loans advanced” of €240m.

(3) Derivatives and hedging – as noted in the preview to the annual report many people tend to glaze over when you mention “derivatives” and “hedging” but there are two aspects to both which people can relate to – the impact on NAMA’s bottom line this year and future risk which may impact on NAMA’s bottom line in years to come. At least in this whole area, NAMA has produced three fulsome notes in the annual report (Note 15 on pages 86-87, Note 17-19 on pages 89-99). Remember that in simple terms, all derivatives and hedging are , are insurance policies against future fluctuations in foreign exchange rates and interest rates. The bottom line is that NAMA booked a profit of €30m on derivatives in the period and present expectation is to book a relatively modest gain in the future. Fears about exotic derivative products appear to have been unfounded – remember NAMA engaged a specialist bank, Societe General, to value derivatives and over a year after acquiring the first tranche, there doesn’t appear to have been any nasty surprises.

(4) Despite ringing up a jaw-dropping €1.1bn loss for the year, NAMA paid a dividend to its private sector investors – Irish Life Investment Managers, New Ireland Assurance and Allied Irish Banks Investment Managers. The dividend noted in Note 33 on page 111 totalled €5.093m. According to the EU decision approving the NAMA project “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 […].” So if NAMA made a loss of €1.1bn, how the blazes did the private sector investors manage to extract over €5m from NAMA?

(5) In terms of salaries and personal expenses, it is noteworthy that one non-executive director, Michael Connolly received a whopping €146,374 when the basic director rewards were indicated by the late Brian Lenihan in March 2010 to be €50,000 per board member. One director, Steven Seelig an American who formerly worked with the IMF received €36,915 in travel and accommodation expenses over a seven-month period. Now Steven is reported to have attended 21 board meetings, 9 audit meetings and 5 risk management meetings but it is not clear whether “attendance” was physical attendance or Steven calling in by phone or Skype. You might recall former IMF managing director, Dominique Strauss-Kahn’s USD $3,000 a night stay at the Sofitel hotel inNew York a few months ago and ask if similar levels of expense are being incurred in this instance. NAMA has not responded to specific questions about actual attendance or why Steven’s travel expenses alone of the board were via “reimbursement”, but NAMA does say Steven does live in theUS and the fees refer to meetings which took place in 2010. (UPDATE: 2nd August , 2011. It has been pointed out that then-Minister for Finance, the late Brian Lenihan replied to a Dail question in the following terms in March 2010. In addition to a basic fee of €50,000 directors are also entitled to an additional fee of €10,000 if they chair a committee (limited to one additional fee) and also the Chair of the Credit Committee (Michael Connolly) is to be paid €150,000 per annum “on the understanding that the incumbent works no less than 3 to 4 days a week”)

(6) And on the vexed question of bonuses, the word “bonus” appeas once in the annual report beside CEO, Brendan McDonagh’s name which the quantum shown is nil. That said, we know that bonuses were paid to some NTMA employees in the year – €1,981,760 to 258 employees and we know some bonuses were paid in NAMA, because NAMA employees are legally employed by the NTMA (and because bonuses were paid to 258 out of the 305 total employees at the NTMA).

(7) People. It was also news to me that NAMA had so-called “external board members” who were previously reported to be just members of NAMA committees and the names Alice Charles , Gavin Daly and Michael Wall “an architect, planner, barrister and former member of An Bord Pleanála” as NAMA external board members is new to me –  they’re paid €1-5,000 per year and appear to only act on NAMA’s Planning Committee. The appointment of two other people to the Northern Ireland Committee, Frank Cushnahan and Brian Rowntree was well-publicised, possibly because NAMA wanted to promote its sympathetic and engaged treatment of borrowers and property inNorthern Ireland – these two are also listed as “external board members”

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