The operation of NAMA is seemingly getting less transparent under this new Government. Yes, Fine Gael promised a register of all loans that were in default in NAMA but the sensible view was that such a register would never see the light of day because of contractual, data protection and confidentiality issues. Michael Noonan, the Minister for Finance, and minister with greatest influence over NAMA’s operations has not once mentioned the register since being elected in February 2011. But it seems the operation of NAMA is not just NOT becoming more transparent, it is actually going backwards and becoming even more secretive.
Take the review of NAMA by former HSBC banker, Michael Geoghegan (profile and picture here) which was undertaken at the start of October 2011. We don’t even know who initiated the review – Minister Noonan claims he did, NAMA claims it did, departed NAMA board member Peter Stewart intimated it was his idea. Who knows? But regardless, we don’t know what the review concluded – when asked about the review at the NAMA appearance before the Oireachtas Committee of Public Accounts in October 2011, the NAMA chairman said the review was presented to the board orally and nothing was written down.
This afternoon RTE’s David Murphy reports that the Geoghegan review “raised the possibility” of the Government selling NAMA – not just the assets in NAMA, but NAMA itself! What RTE describes as the Geoghegan “report” is also said to recommend NAMA taking more direct control of more developers loans – remember that NAMA presently manages about 180 developers directly, the remaining 700-odd are managed at the original banks under the watchful eye of NAMA’s “master loan service provider” Capita. The “report” is said to recommend NAMA doubles in size from 200 to 400 employees to manage the extra workload.
If you were one of the TDs or Senators on the public accounts committee, you might feel a little offended that the review contained a suggestion that NAMA be sold or doubled in size, and yet none of this was forthcoming when NAMA was quizzed on the Geoghegan review in October.
So who would buy NAMA? Remember that NAMA is now busy selling the “low-hanging fruit” so it will be left with the more difficult assets as time moves on. NAMA has huge expertise in loan acquisition, but that phase has ended. In Ireland Certus is asset-managing Bank of Scotland (Ireland) legacy loans; Ulster, ACC, National Irish Bank manage their own bad loans but would they be interested in selling these loans to NAMA? Further afield, there is talk of other European countries setting up their own equivalent of NAMA, for example Spain. But would NAMA’s expertise translate to the Spanish market? So beyond NAMA’s assets, what would a buyer be getting? An expensive lease on Treasury Building in Dublin 2? An organisation that has been criticised for being too public-service, process-focussed? Difficult to say, but the man who reportedly introduced the possibility of NAMA being sold, Michael Geoghegan has been announced as the new chair of the NAMA advisory board.
UPDATE: 8th December, 2011. It is understood that the Geoghegan Report was originally agreed for oral presentation to NAMA’s board and to Minister for Finance, Michael Noonan and was subsequently delivered as such; but that it is now hoped that a written version may be made available publicly in order to inform debate on NAMA. Reports suggest the Department of Finance will publish the report later today or tomorrow.
UPDATE: 8th December, 2011. NAMA has now made available the Geoghegan report which is here, and has also simultaneously produced a press release available here. Analysis will follow here later.
UPDATE: 9th December, 2011. There is a separate entry reviewing the Geoghegan report here.
Meanwhile, From RTE News,
“credit ratings agency Standard & Poors has placed NAMA on creditwatch negative – indicating it is considering downgrading the creditworthiness rating of the agency.
The move follows S&P’s decision earlier this week to place almost all of the Eurozone states and the EFSF on creditwatch negative, over concerns that governments were not moving quickly enough to deal with the eurozone crisis.
As NAMA is a state guaranteed entity, S&P applies the same criteria as it does to sovereigns.”
Geoghegan smells a killing to be made.
@RB
What’s in a name? that which we call a junk bond
By any other name would smell as sour;
@NWL
You may want grab the http://www.geogheganreit.com domain name before it’s gone. NAMA WINE LAKE may go the way of http://www.lehman.com
ft article here:
http://www.ft.com/intl/cms/s/0/3957e826-2107-11e1-8a43-00144feabdc0.html?ftcamp=rss#axzz1flQ7LxMx
This is hardly unexpected. It is the first step in the commercialisation of NAMA.
To date NAMA has been a political entity complete with “civil service” thinking and attitude to business.
The suggestion that NAMA may be sold as an entity is really disingenuous political “speak”. NAMA’s loanbook will be sold. If the rump is to be sold as a platform, then the outlying satellite lending management needs to be brought in to the centre, so that NAMA is perceived as a cohesive entity.
From a political viewpoint, a sale of NAMA as an entity solves the staff problem. NAMA has a limited life-span. It is a “run-off” vehicle. This poses a few problems for its creators. The staff will get edgy and will have become close to some of the regular carpetbaggers as the assets are sold. They will see their future with these purchasers rather than with NAMA and in a reaction akin to the Stockholm syndrome, their loyalties will shift to the vultures – with a consequent subversion of price (putting it nicely!).
The use of this sales method allows the politicians to lay off the legacy problems of layoffs and redundancy payments incurred in a wind-down scenario. It also moves the politically embarrassing deals that will have to be made with debtors from the public and media agenda. Reality is dawning, and it is now realised that the best and sometimes the only buyers for the physical assets that will constitute the rump of the loanbook are the existing borrowers.
It is an ambitious undertaking to sell the agency in one lump. In reality it will not happen. Buyers of residual loanbooks never want the staff. They have their own staff that understand their culture and modus operandi. Legacy staff are steeped in the culture of the “old bank”. NAMA’s staff at this stage are indoctrinated in the civil service culture beloved of Frank and Brendan and will be singularly unsuitable for the new purchaser’s agenda.
The “cherries” will be sold first, whether they are the underlying properties or loan portfolios and the balance of the loanbook will be sold off to the highest bidder, as has happened to the banks’ loanbooks in the USA, mainland Europe and the UK.
Whether that is described as the sale of the loanbook or of NAMA itself is really irrelevant. It will be sold. That is the commercial way.
What exactly would we be selling? For example, would the NAMA bonds still be government guaranteed? etc. Would it be selling the NAMA ‘company’ or the whole asset portfolio?
It’s hard to see who would have the capacity/desire to buy the whole portfolio. The recent events at NAMA seem odd. How long did Geoghegan spend at NAMA and did he have any helpers?
As I mentioned before on another thread, rumours are rife of a major cull at the top of NAMA. There will be a sea change in its culture and thinking. Adding value to the underlying assets and sales of portfolios will take centre stage as will a necessary change in relationship with the borrowers.
Noonan wanted Geoghan to replace Daly. Geoghan refused as didn’t want to be politicised. Hence this oversight comittee. Has had pretty strong assurances from Finance and if Geoghan doesn’t see progress in 6 months, he’ll probably walk. If he doesn’t Frank will.
BTW, I’ll believe that comment about relationship changes when I see it. At present they are dire. No trust, little co-operation and a lot of deeply felt antagonism! Not a good platform for progress.
Have to add my disappointment to the FT report. At least the Irish news stories did qualify that any sale would be towards the end of NAMA’s lifespan (even if it will be less valuable then as NWL says)
Is this the report – it just appeared online…:
http://www.finance.gov.ie/documents/pressreleases/2011/mn068append.pdf
Mr Geoghegan wants to take a €100m to €200m portfolio from NAMA, have it managed by an independent third party and compare performance, in order to ascertain if it would be more appropriate to move the management to property professionals. Having experienced the business acumen of the short planks working for NAMA, I know who my money will be on.
NAMA’s review of the report is very selective and notable for the recommendations omitted as well as those listed.
No word on giving the boys and girls at NAMA,a piece of the action.Directly tie in reward to profit,quite motivating and simple.But if you get the same amount regardless of how the properties perform,why bother.The 10% kicker outlined in the letter NWL linked is back end,not expected any borrower will ever hit it.
The letter referenced is on other post relating to salaries,NAMA should be and looks like it finally,set up as a Real Estate Opportunity Fund.The cupboard is getting bare,the family silver is gone or going.They need to JV with original borrowers, radically rethink relationship with the industry.The learning curve on complex deals is too steep,most suitable and those with greatest skill set, like it or not are original borrowers.Best way for taxpayer to maximize return is by collaborating working together with original borrowers.