Archive for April 23rd, 2012

The Manchester Evening News thinks NAMA is selling a development opportunity in Manchester city centre. The so-called “London Scottish” building, because it used to accommodate London and Scottish Bank has 50,000 sq ft of office space but has plans to double or even quadruple that – the building on Mount Street in Manchester city centre is pictured here. Bought by Dublin developer Liam Walls’ Walls Developments in 2007 for GBP 20m (€24m), it might be expected to fetch half of that today, according to industry monitoring group, IPD, commercial property in general in the UK is down 35% from peak in June 2007 but it is generally accepted that property outside London and the south east has suffered greater declines. It’s supposed to be offered for sale by Manchester agents WHR and by CB Richard Ellis, but it doesn’t appear to be on either agents’ websites.

Curiously there doesn’t appear to be any property on the last NAMA foreclosure list which matches this building, so it might be that the Evening News is mistaken and the property is merely being sold by the developer under NAMA’s auspices rather than being a property vesting in NAMA or its receivers from a foreclosure.


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Continuing to play no small part in supporting the most expensive market for legal services in Europe, NAMA has launched legal proceedings against the developer behind Chieftain Construction, Limerick-man Ger O’Rourke and his wife, Majella – it is the two individuals that NAMA is suing, not the company. The NAMA entity that made the application on Thursday last 19th April, 2012 at Dublin’s High Court is National Asset Loan Management Limited and is represented by Dublin solicitors, Whitney Moore which I believe is the first time this firm has been used by the Agency. The case reference is 2012 / 1451 S

Ger O’Rourke, aged 50 – pictured here on his €0.5m racing yacht – has been in the wars for some time and has previously had a €21m judgment awarded against him in favour of AIB and in March 2012, the Limerick Leader reported him saying that he had debts of over €100m with assets of less than €4m. His wife Majella had been a director of Chieftain but this is the first time that I have seen husband and wife sued by the Agency in their own right.

Chieftain Construction has been behind major projects here, in the US, South Africa and the UK including a €50m hotel-centred redevelopment around Liverpool’s Lime Street railway station.

We don’t yet have details of the current application. In the past, NAMA has taken legal action against individuals to enforce personal guarantees or to secure personal judgments, but it should be stressed that we do not know if either of these objectives lies behind the current application.

UPDATE: 24th January 2013. The Phoenix Magazine in Dublin, out today, claims that NAMA is pursuing two remedies against Ger O’Rourke and his wife, Majella. Firstly there is a €435,000 judgment against the Limerick developer, and secondly there is the reversal of the transfer of what is described as the family home at Mill House, Ballyclogh, County Limerick.  A judgment is awaited.

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You’d think buyers would be queuing up around the block of Upper Merrion Street following the decision of the Government to sell the 17% of NAMA currently owned by Irish Life Investment Managers. Well, too late, the stake has already been sold!

Although we all regard NAMA as a government agency, back in 2009 the Government was careful to structure NAMA so that its debts would stay off the national balance sheet. So the Government enticed/strong-armed three “third party independent investors” to take majority ownership of NAMA, the three being Irish Life Investment Managers (part of Irish Life and Permanent), New Ireland Assurance (part of Bank of Ireland) and Allied Irish Banks Investment Managers (part of AIB originally but sold in November 2011 to a South African investment group). Each of these three investors handed over €17m apiece for a 17% stake in NAMA and the Government put in the remaining €49m so that NAMA started out in life with a €100m capital base.

That’s the history lesson concluded. Fast-forward to today and the Government is set to take 100% control of Irish Life so the State will own not just 49% which allows NAMA’s debts to stay off the national balance sheet but 66% which would likely mean NAMA’s debts – mostly its €28bn of bond which this State has guaranteed – would come onto our General Government Debt pushing our debt next year up from 119% to 138%. This is largely academic of course if you believe that NAMA’s assets will be sufficient to pay off the NAMA bonds by 2020. NAMA has recently reported a profit for 2011 of €200m after a loss of €1,100m in 2010 and who knows, maybe it will break even or make a profit but it is a risk and the ratings agencies which examine Ireland’s ability to repay debt, generally regard NAMA’s bonds as part of the national debt with a caveat that they are backed up by assets, but that there is risk to the value of those assets.

However the Minister for Finance, Michael Noonan is taking no chances and the Department of Finance has announced this morning that the Irish Life shareholding in NAMA has been sold to “private investors”  The Minister says in the statement

“The Minister also noted the reservation in relation to the ownership of the NAMA SPV, which the Department had previously acknowledged.  He is not concerned by the reservation as the sale of the Irish Life shareholding to private investors has just been agreed.  It is anticipated that the transaction will be completed in the coming weeks and this will ensure that the reservation will be lifted and the statistical treatment of NAMA will be unchanged.  The effect of the sale will mean that NAMA will continue to have absolutely no General Government impact.  In addition, it is worth noting that provisional figures indicate that NAMA has posted a profit of €200m in 2011 and has very sizeable cash reserves.”

Who might the “private investors” be? We don’t yet know but I can’t see any completely independent third party investor wanting to take the stake, the terms of which are examined here – and which allowed the third party investors to walk away with a dividend of €5.093m in 2010 despite NAMA making a loss of €1.1bn.

For information, Irish Life Investment Managers, the outgoing shareholder, describes itself as “the asset management arm of Irish Life & Permanent plc. ILIM manages money on behalf of a wide range of clients from large multinational corporations, charities and domestic companies. Currently managing assets of in excess of €30bn”

UPDATE: 2nd May, 2012. Minister Noonan said in the Dail yesterday that “my Department has been notified that the sale of the Irish Life shareholding in the NAMA SPV to private investors has been agreed and it is anticipated that the transaction will be completed in the coming weeks”

UPDATE: 26th May, 2012. Minister Noonan is still not revealing the identity of NAMA’s new shareholder, replying to a Dail question the Minister said “the identity of the new private investors will be made public in due course when the deal is completed”

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It seems to be a moot point for the time being given that NAMA is saying it will make a profit of €200m in 2011, but Minister for Finance, Michael Noonan last week said in a reply to a parliamentary question that NAMA does not have any minimum capital requirements and can accordingly continue to operate even if balance sheet-insolvent.

So what is “balance sheet-insolvent”? This is where a company’s assets are worth less than its liabilities. For example, Independent News and Media – the loss-making media group that Denis O’Brien and the O’Reilly family are scrapping over – recently reported its preliminary 2011 financial results and said that its assets came to €573.7m, its liabilities to €596.5m and the company therefore had €22.8m of net liabilities. It is balance sheet-insolvent. Now this is not to suggest that IN&M can’t pay its bills as they fall due, it seems to have no problem at all on that front and some of its liabilities, eg its pension commitments are of a long term nature, and the company seems to have decent relations with the banks providing it with loans of  €426.8m.

Turning to NAMA, NAMA started out with €100m of capital – €49m from the State and €51m from three “independent third party” investors. In addition NAMA regards the c€1.5bn that it has paid with so-called “subordinated debt” for the acquisition of loans, as capital; why? because this subordinated debt is only payable if NAMA makes a profit over its lifetime. NAMA made a loss of €1.1bn in 2010 which ate away most of its €100m capital and €1.5bn subordinated debt, and if it were to have made a loss of more than €500m in 2011, then it would be balance sheet-insolvent. As it happens, last week the Minister for Finance announced NAMA’s preliminary results for 2011 which indicated a profit of €200m, so NAMA appears not to be at risk of becoming balance sheet-insolvent; at least not in 2011.

However the Minister’s response went further and said that even if NAMA were to become balance sheet-insolvent, it does not have a minimum capital requirement. Accordingly it seems on here that NAMA will not require additional capital from the State for a couple of years at least, but once the better assets are sold off and as NAMA approaches the 2020 deadline for repaying all its bonds, that position may change. Here’s the Minister’s full response to Sinn Fein’s finance spokesperson, Pearse Doherty.

“NAMA is not a corporate body established under the Companies Acts. It is a statutory body established under the NAMA Act, 2009 and has no minimal capital requirements. I should clarify that I am advised by NAMA that it is not balance sheet insolvent. As with any business, the key obligation for the Agency in terms of solvency, is to ensure it continues to have sufficient cash to meet its short term funding obligations. At 31 March 2012, the Agency had liquid resources of €4.6 billion, comprising cash of €3.6 billion and short-term Irish Government bonds (maturity of less than one year) of €1.0 billion. This was after the repayment of Senior Bonds of €1.25 billion during 2011 and the full repayment of the €299 million loan provided by the Central Fund to NAMA on its inception.

The main charge in the 2010 financial statements was a €1.49bn loan impairment loss. This is an unrealised loss with no short term cash impact on the Agency. However, this loss did reduce the amounts of capital and reserves of the Agency. NAMA is expected to still continue to have positive reserves at end 2011”

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There is no sign of any abatement in NAMA’s appetite to take legal action. On Friday last, the Agency made an application in Dublin’s High Court against three individuals, two of whom are current partners in Limerick law firm McMahon O’Brien and the third appears to have been a former partner in the same firm when it traded as McMahon O’Brien Downes – the individuals are Denis McMahon, Paul O’Brien and Seamus Downes. The case reference is 2012 / 1475 S and the NAMA entity bringing the action is National Asset Loan Management Limited represented by Eversheds solicitors. There are no solicitors on record for the defendants who are solicitors in their own right and there is no scheduled hearing date yet.

NAMA has taken extensive foreclosure action against property companies associated with Paul O’Brien – pictured here with former Taoiseach Brian Cowen and current TD, Mattie McGrath. In January 2012 NAMA had receivers appointed to three companies associated with Paul O’Brien, at the start of March 2012 it had receivers appointed to two more and later in March NAMA initiated legal action against companies and individuals including Paul O’Brien and Denis McMahon.

We don’t yet have details of the current application. In the past, NAMA has taken legal action against individuals to enforce personal guarantees or to secure personal judgments, but it should be stressed that we do not know if either of these objectives lies behind the current application.

UPDATE: 23rd April, 2012. Two further applications have appeared on the Courts Service website, both dated last Friday 20th April 2012 and both connected with Paul O’Brien. The first is case reference 2012/1473 S and the five defendants are Greenband Investments,  John Costello, John Hegarty, Paul O’Brien and MKI Property Investments. The second is case reference 2012/1474 S and the four defendants are Paul O’Brien, Joseph McNamara, James McNamara and Gerard McNamara.

UPDATE: 19th June, 2012. The Irish Independent reports that NAMA has obtained judgment orders against  Paul O’Brien (€58m) and Denis McMahon (€13.8m). The cases are ongoing against other defendants and there remains the matter of interest payable.

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