Archive for July, 2012

This morning, the Central Bank of Ireland (CBI) has released its monthly snapshot of the state of Irish banks focussing on deposits and lending. The data covers the period up to 29th June 2012 and shows that during the month of June 2012, deposits by ordinary households and businesses reduced substantially at the so-called “covered” or State-supported banks – essentially the two pillar banks, Bank of Ireland and AIB, and also Permanent TSB. The decline of €3.0bn from €107.5bn in May 2012 to €104.6bn in June 2012 was the biggest monthly decline since May/June 2011. Deposits are now back at May/June 2011 levels which marks something of a reversal in the recent trend of deposit growth and is down over €20bn from October 2010, the month before the IMF/EU bailout. Private sector deposits have actually risen by €1bn at covered banks in the past 12 months , with a trend of gently growing deposits interrupted by a leap in Mar/April 2012 reversed by today’s decline. The CBI commentary on the figures is here and this is what it says about private sector deposits:

“There was a month-on-month decrease of €3.2 billion in Irish resident private-sector deposits during June. This decline was dominated by developments in repo deposits vis-à-vis OFIs, which fell by €2.8 billion during the month as positions entered into in April 2012 were, as expected, unwound. This repo position with an entity in the OFI sector was replaced by a similar arrangement between credit institutions. Household deposits increased by €120 million during the month of June 2012, while NFC deposits decreased by €38 million”

The CBI doesn’t provide an analysis of private sector deposits at the covered banks – about the only analysis it doesn’t provide – but in terms of all banks operating in Ireland including foreign and IFSC banks, Irish household deposits increased by €103m in June, which brings such deposits to €92.1bn, the same as the June 2011 level. Total deposits from all sources in all Irish banks increased by  €0.3bn in June..

Although the Department of Finance appears to have published its “Deposits Trends” series for June 2012, it isn’t yet available from the Department’s website, but the excellent Daily Business Post has reported that it will show retail deposits at Irish banks increased by €600m in June 2012 to now stand at €153bn, well above the floor reached last year. These figures include deposits at overseas operations of Irish banks eg the Bank of Ireland/Post Office joint venture in the UK. However the Department does say that one half of the increase in the month is from deposits at Irish branches. But the bouquet is positive, and should be welcomed as good news.

Here is the full set of deposit statistics for the different categories of bank operating in Ireland.

First up is the consolidated picture for all banks operating in Ireland including those 450-banks based in the IFSC which do not service the domestic economy.

Next up are the 20 banks which do service the domestic economy and include local subsidiaries of foreign banks like Danske, KBC and Rabobank. There is a list of all banks operating in Ireland here together with a note of the 20 that service the domestic economy.

And lastly the six State-guaranteed or “covered” financial institutions (AIB, Anglo, Bank of Ireland, EBS, Irish Life and Permanent and INBS – Anglo and INBS have now been merged to form the Irish Banking Resolution Corporation, IBRC)

(1) Monetary Financial Institutions (MFIs) refers to credit institutions, as defined in Community Law, money market funds, and other resident financial institutions whose business is to receive deposits and/or close substitutes for deposits from entities other than MFIs, and, for their own account (at least in economic terms), to grant credits and/or to make investments in securities. Since January 2009, credit institutions include Credit Unions as regulated by the Registrar of Credit Unions. Under ESA 95, the Eurosystem (including the Central Bank ofIreland) and other non-euro area national central banks are included in the MFI institutional sector. In the tables presented here, however, central banks are not included in the loans and deposits series with respect to MFI counterparties.

(2) NR Euro are Non-Resident European depositors

(3) NR Row are Non-Resident Rest of World depositors (ie outsideEurope)


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[The judgment is now online here.]

This morning in Dublin’s High Court, Ms Justice Finlay Geoghegan dismissed Treasury Holdings’ application for a judicial review of NAMA’s dealings with its €1.7bn of loans. It is hoped the judgment will be available shortly and will be posted here as an update, but immediate reporting by Mary Carolan at the Irish Times suggests that the key point in the case was the offer made by Treasury in January 2012 of not pursuing a case through the courts with NAMA on condition that NAMA enter into a standstill agreement to allow for the examination of third party offers for Treasury’s loans. The judge appears to have held that Treasury was in fact entitled to be consulted before NAMA took action. So although this might be a NAMA victory, I don’t think the Agency will be jubilant.

No word yet from Treasury as to any appeal, but you might recall that in a previous NAMA court case, the developer Paddy McKillen lost comprehensively at the High Court but then went on to secure a draw at the Supreme Court, which reversed some of the lower court’s judgment.

Treasury had to offer up unencumbered assets as security for costs in this case, and it won’t have been a cheap undertaking, with little change on NAMA’s side out of €1m I would have said.

The judicial review hearing was preceded by a Treasury offer to NAMA to enter into mediation, to which there was no apparent response from NAMA. Treasury then sponsored a Peter Bacon review of the Irish economy featuring NAMA. And NAMA hasn’t relented on its pursuit of the Treasury founders, the colourful Johnny Ronan and understated Richard Barrett, with fresh applications last month seeking €3m from each pursuant to personal guarantees.

So, a bad day for Treasury and its founders, and somehow, I don’t think there will be 4,000 on the street(s) of Enniskerry this evening marching in solidarity with Messrs Ronan and Barrett…

UPDATE (1): 31st July, 2012. Still awaiting judgment and Treasury/NAMA reactions to the judgment, but RTE’s seasoned Legal Correspondent, Orla O’Donnell gives her (more than) tuppence worth here on prospects for an appeal by Treasury.

UPDATE (2): 31st July, 2012. NAMA has issued a terse and work-manlike statement which merely says “NAMA welcomes today’s decision from the High Court and will continue to work with the NAMA-appointed receivers in this case to maximise the return to the taxpayer”

UPDATE (3): 31st July, 2012. The judgment is now online here.

UPDATE (4): 31st July, 2012. Treasury has now issued a statement, available here, in which it confirms it “will now mount an appeal” – the statement pulls out the positives from the judgment, the right to be consulted, the obligation on NAMA to consider proposals and the unfair procedure of NAMA having a meeting on 6th December 2011 where it apparently committed to a course of action before Treasury had submitted its “final” plan.

UPDATE (5): 31st July, 2012.

“Conclusion on Standstill and Estoppel 167. I have concluded that in accordance with the foregoing principles and on the finding of facts herein, the Court must hold that Treasury is estopped from pursuing its claim for the orders of certiorari of the decisions of 8th December, 2011, and 25th January, 2012.”

“it appears to me that NAMA was under a duty to give Treasury an opportunity to be heard and Treasury had a concomitant right to be heard in advance of the taking of the decision to enforce”

“I am satisfied, therefore, that NAMA acted in breach of its obligation to act fairly and reasonably in the taking of the decision to enforce on 8th December, 2011”

Extracts from the judgement from Judge Finlay Geoghegan, although Treasury has lost this battle, NAMA may have suffered serious damage to its abilities generally in the war.

Having now studied this judgment, it looks like a pyrrhic victory for NAMA in that it has escaped with its skin – just about – in this specific instance with Treasury Holdings because of the commitment given by Treasury not to pursue legal action in return for NAMA granting a standstill period to allow for the examination of third party bids for Treasury’s loans. BUT the Judge has seemingly opened the floodgates for legal action by any developer whose loans have been enforced. There are specific facts that apply in the Treasury case that mightn’t apply elsewhere, but it doesn’t seem on here that these are narrow, esoteric or highly unusual facts.

Ray and Danny Grehan are probably studying this judgment closely!

The Judge states

“I have concluded, applying the principles in Beirne and O’Donnell, that NAMA has failed to establish that its decision to enforce is not a decision amenable to judicial review. In my judgment, on the statutory framework and facts, it fails both limbs of the applicable test set out in Beirne and applied in O’Donnell.”

In other words, every single decision taken by NAMA to enforce is amenable to judicial review. And in the circumstances of Treasury’s loans, the Judge pours more oil on the fire by judging that Treasury had a right to be heard before NAMA appointed receivers.

“I have come to the conclusion that Treasury did have a right to be heard in December 2011 before NAMA took a decision to enforce by making demands, and if, as was inevitable, such demands were not met, by appointing receivers. If considered from the perspective of NAMA obligations, I am of the view that NAMA was under an obligation by reason of the then factual circumstances to give Treasury an opportunity to be heard prior to taking a decision to enforce.”

The Judge also concludes that NAMA’s actions weren’t fair in that Treasury didn’t have an opportunity to make representations to NAMA, eg to present third party investment proposals.

This may not be a good day for Treasury, but it’s a pretty dreadful day for NAMA also.

UPDATE: 1st August, 2012. The judgment makes for intriguing reading and refers to a NAMA claim that litigation with which Treasury is presumably involved, with an entity designated “AIAC”, is set to fail. An unusual inclusion in a court judgment, reproduced below.


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[short answer, 2017 if NAMA sticks to its internal debt repayment targets and the economy recovers gradually so that NAMA breaks even on its loans]

It’s difficult on a clammy day like today to convincingly feel the biting winds and bitterly cold days of winter. But just as winter is inevitably coming, so too is the day when NAMA will run out of cash. The original plan of course was that NAMA would in fact benignly run out of cash in 2020, when the Agency was scheduled to be wound up, and its surplus profit handed over to the Exchequer. When NAMA was conceived in 2009, that surplus was estimated in 2020 to be €5bn, and then in 2010 the Agency said its “central scenario” was that the surplus in 2020 would be €1bn. In recent weeks, the Agency has seemingly been recognising the deep hole it is in and has been preparing the ground for a break-even in 2020, meaning no surplus would be handed back to the Exchequer, and, to boot, that the Agency would renege on the €1.6bn of subordinated bonds that it has given the banks, meaning the banks – which we mainly own – will take a €1.6bn hit in 2020.

So it was always the plan that NAMA would run out of cash, but only when it was wound up. Unfortunately for the Agency, the writing is now on the wall and it seems to be written that the Agency will face operational challenges before 2020.

But NAMA is sitting on €4bn of cash today, a phenomenal sum, so how will it run out of cash?

The reason NAMA is so cash-rich today, is that it has sold one quarter of its assets but only redeemed one tenth of its bonds. If you get a loan of €30 from the bank today and buy postage stamps and sell some for €8 and repay €3 to the bank, then you too will be cash-rich to the tune of €5! There’s no magic to it, and if the stamps had a face value of €6 or €10, it doesn’t matter – you’ll be in clover because you have made more cash from sales than your loan repayments. And this is where NAMA is today.

But here is NAMA’s problem: it may be sitting atop a cash mountain today, but just as inevitably as winter will replace these clammy summer days, so too will leaner days lie ahead for NAMA as it repays more of its bonds.

NAMA’s cash position can be simply forecast by examining the timings/amounts under the following headings.

Opening Balance

+ Income

Interest on performing loans

Repayment of performing loans

Proceeds from disposing of loans/properties

– Outgoings

Operating costs

Interest on NAMA bonds

Redemption of NAMA bonds

New advances

NAMA will have three phases

(1) Today, Summer 2012-2013! NAMA is in clover and why shouldn’t it be. Remember, it didn’t just acquire “bad” or “toxic” loans, it acquired some loans which are quite marketable and attractive eg the €800m loans to Paddy McKillen’s Maybourne group of hotels which NAMA reportedly sold at original par value, and David Daly’s near-€500m of loans which David 100% refinanced out of NAMA. Unsurprisingly, NAMA has some “low-lying fruit” and it has been picking them and selling them at a near-breakneck pace, with €9bn of disposals presently approved. And on the outgoings side of the equation, NAMA has only redeemed €3.25bn of its bonds, so yes today, NAMA is awash with cash. How much more “low hanging fruit” is there in NAMA? Difficult to say, but if only 19% of loans are performing and if at the end of March 2012, NAMA itself optimistically thinks its loans are worth just 35c in the euro, compared with the 43c in the euro that NAMA paid, it’s not a huge leap to suggest that NAMA is coming to the end of harvest season!

(2) Autumn 2014-2016, thanks to Minister for Finance Michael Noonan unilaterally agreeing with the Troika in May 2012, to NAMA having a debt repayment target of €7.5bn by the end of 2013, NAMA needs to make sure it redeems a further €4bn of its bonds in the next 17 months. Thankfully, Minister Noonan hasn’t (yet!) agreed with the Troika that NAMA will repay more of its bonds before their legally due date of 2020, but NAMA has produced internal targets of paying an additional €4.5bn by the end of 2015, €12bn by the end of 2017, €4.5bn by the end of 2018 and the remaining €1.5bn in 2019 and if the Agency is going to meet these targets. Contrary to the perception created on here before, the deterioration of NAMA’s loan-book with 19% of loans performing today SHOULDN’T trigger a crisis because the annual cash deficit would be in the order of €300-500m and even eight years of that would be €4bn which would simply mean NAMA couldn’t redeem €4bn of its bonds in 2018, which is quite a while away. However, from a political perspective, when NAMA’s interest receipts are insufficient to cover interest payments and operating costs, difficult questions will be asked of the Agency and its wisdom and with less than 20% of loans performing in 2012, NAMA may have reached that point already. If the economy hasn’t picked up, then NAMA might try to push out its internal debt repayment targets, or it will start to offload property at unfavourable prices, and if it does the latter it will be practically guaranteeing the next stage.

(3) Winter 2017-2020. Once NAMA has sold the low-hanging fruit and if, during its Autumn phase, it has sold secondary property at unfavourable prices, then this third phase might get very frosty indeed for the Agency, as the 2020 redemption deadline hoves into view and it becomes blindingly obvious that the remaining assets can’t be realised for prices which will allow all the bonds to be redeemed. Which means on 1st March 2020, the State ends up on the hook for any shortfall. Because NAMA has the luxury of waiting until 1st March 2020 to wind up, it might be that it truly doesn’t run out of cash until then. Of course, we can be optimistic and hope that the economy grows at a healthy pace and social and economic patterns of the past repeat themselves, or we can hope the ECB finally decides to print money to deal with the EuroZone debt crisis; should that happen, then NAMA’s underlying property assets should increase in value whilst the redeemable NAMA bonds remain fixed.

So, to conclude, NAMA could well put off the date on which it runs out of cash by deferring the redemption of its bonds to as close as possible to 2020. NAMA seemingly has the luxury of sitting on assets for the next two years, as it seems that it will easily cover its cash outgoings until then. But if NAMA sticks to its internal debt repayment targets and if the economy does not improve after 2013, then NAMA will find itself forced to sell assets at what are likely to be fire sale prices and indeed after the €12bn debt redemption in 2017, NAMA may be cash negative. Also it seems likely that today in 2012, NAMA’s cash receipts for interest income does not cover its cash expenditure for interest on its bonds and its operating costs.

Part 2 will examine NAMA’s exposure should the economy not grow so that it recovers what it paid for the loans, and the effect of its cash interest income not being sufficient to pay its operating expenses and interest expense.

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Actually the property is in fact being managed by receivers on behalf of NAMA, but still, NAMA has launched new website features to help us establish what property is controlled by the Agency’s receivers.

We can now search for different types of property in the Republic of Ireland, Northern Ireland and Great Britain. And the information is presented in an altogether more attractive format, particularly if you are searching a small number of properties.

For the time being, we cannot download a complete listing as we could before. It is hoped that NAMA will shortly issue a statement giving more information about the new features, and any plans to further improve the presentation and quality of information provided. At lask week’s launch of the 2011 Annual Report, the NAMA CEO Brendan McDonagh indicated there would be photographs of properties for sale, for example, in future.

Unfortunately, we still don’t have a list of properties presently for sale by NAMA developers, and remember NAMA has foreclosed on perhaps just 10% of the property subject to its loans. NAMA says that such a list of property for sale by its developers would conflict with NAMA’s duty to maintain the confidentiality of its dealings with developers. So we may still get examples like the two sales in Cork where the properties – both landbanks on the outskirts of Cork city, detailed here and here – were sold without coming onto the open market.

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He mightn’t have earned credit amongst the developer community when he claimed NAMA was trying to put all of its developers into three bed-semis and Ford Cortinas, but developer and businessman David Agar this week demonstrated his finer qualities when he won €30m in a court settlement following a case he had taken against Ulster Bank, part of the RBS group.

Harry Wilson at the Daily Telegraph yesterday evening reported that David has settled a High Court case which was initiated in December 2010 (High Court reference 2010/11057 P) . The case involved the misselling of interest rate swaps – insurance policies sold to borrowers to protect them against future interest rate rises on their loans – and according to the Telegraph,  the win means that Ulster Bank will “write-off swaps and loans worth €30m as well as covering Mr Agar’s legal costs, which are believed to total about €1m.” Given the win seems to correspond with an Ulster Bank loss, there is unlikely to be any benefit to NAMA. As the case was settled, there won’t be a judgment.

Misselling these swaps, or insurance policies, involved the banks selling these policies where it was inappropriate to do so or where the cost exceeded potential benefits – the banks have been held to have had a professional duty in advising their borrowers in relation to these insurance policies which boosted bank profits and bonuses.

The win is believed to be the tip of an iceberg of potential losses faced by British (and Irish) banks for misselling these insurances to their borrowers, and comes in the wake of other malfeasance by banks including the overcharging – alleged by some to be deliberately orchestrated with knowledge and consent going all the way to bank boards – of interest on lending by Irish banks.  Yesterday, the Evening Herald revisited the old story of Anglo’s overcharging, which the present CEO has said might cost the bank up to €100m. The Herald reminds us that Anglo will waive its rights under the Statute of Limitations of six years, in meeting claims of overcharging of customers.

UPDATE: 29th July, 2012. A couple of people have privately asked who David Agar’s solicitors were in this case. According to the Court Service, the solicitors on record is Downes, presumably Downes in Dublin 2, telephone 01-676-2546. Also to access case details at the High Court, you have firstly to accept the Court Service terms and conditions here, and then enter the case reference or other search information to get the case details. For what it is worth, Ulster Bank was represented by A&L Goodbody.

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As management accounts go, the accounts published by NAMA on Wednesday for the three months ending 31st March, 2012 are pretty dire. The accounts reveal major variances with the budgeted costs for 2012 – legal fees and the cost of receivers in particular – and no explanation is given for the variance. And whilst NAMA has published budgeted costs, it doesn’t publish budgeted revenues, so we have no way of knowing if revenues are on plan. Maybe NAMA would say that publishing its budget for revenues would – yaawwwn! – undermine its commercial performance, but it is already on record for its disposal strategies in different geographical/property markets, so why the secrecy?

There are also major differences in the results between Q4, 2011 and the results for this quarter, and to the extent that seasonality encroaches on NAMA’s activities, there are  major differences between Q1, 2012 and Q1, 2011. Why the differences? A good set of management accounts would inform you, but it almost seems as if NAMA has set out to occlude its performance…

It has become nigh impossible to see where NAMA is holding all of its “unrealised profit” – €2bn if you believe the NAMA CEO in an interview during the week. NAMA did generate €1.1bn in cash during the quarter, so it is quite feasible that there are “unrealised profits” but I can’t see them in NAMA’s balance sheet.

Here’s the overview of the profit and loss of the main NAMA entity, National Asset Management Limited (the 2011 figures are those contained in the four sets of quarterly management accounts – the final accounts for year end were different with the main differences being a €1.3bn impairment, €0.6bn for asset sales and a €0.2bn tax credit).

Here’s the detail:

(1) Interest income of €313m for the quarter is down on the €365m in the fourth quarter of 2011. NAMA has been “selling” loans, eg David Daly refinanced nearly €500m of his loans in late 2011 apparently. So these reductions will affect NAMA’s income. On the other hand, non-performing loans have risen again (see below). About 80% of NAMA’s interest is received in cash apparently.

(2) Interest expense of €115m for the quarter is down from the €129m in the four quarter of 2011. The 6-month Euribor rate which NAMA must pay on its bonds is reset twice a year, in February and August and NAMA will have benefited from a decline last year.

(3) Profit on loan sales of €12m is measly and down from the €174m in the fourth quarter of 2011. NAMA is claiming that it is building up “unrealised gains” from loan sales, but it is unclear from the accounts what these might have been during the quarter.

(4) Legal fees. NAMA has a budget of €25m for legal fees in 2012. For the full year 2011, it spent €9.4m. And for the three months ending 31st March 2012, it spent a measly €23,000. That’s about 46 hours of a Dublin solicitor’s time. What on earth is happening???

(5) Portfolio management fees of €355,000 during the quarter look suspiciously low. Remember portfolio management fees are mostly payments to receivers and NAMA has a budget of €33m for these in 2012.

(6) “Other administrative expenses” of €317,000 have been booked during the quarter, but this is the first time this heading has been shown and there is no indication as to what is booked under this heading.

(7) Cash received of €1.1bn during the quarter is astonishing and even after paying interest on NAMA bonds of €253m and making additional advances of €56m to borrowers and paying €51m to “suppliers of services”, NAMA generated a net €758m in cash during the quarter.

(8) Performing loans are now down to 19% from 20% in Q4, 2011. It was recently revealed that the 20% in Q4, 2011 included restructured loans, and that by reference to original loan agreements and values, that just 18% of loans were performing. Because NAMA has been doing more and more restructuring, you might expect there to be perhaps just 15% of its loans that are now performing according to the original loan agreement. That means that NAMA is earning cash interest of about 3% on 15% of €74bn or about €300m per annum. In other words, once these low-hanging fruit are sold and once NAMA has redeemed another €4bn of its bonds as it is now required to do by the end of 2013, the Agency faces challenges in generating enough cash to cover its own costs of €200m per annum and the interest on its bonds of about €300-500m per annum.

(9) Overall profit of €133m was booked in the first quarter but this is before impairments. NAMA has said that in 2012, it will be calculating impairments twice a year instead of formerly once at year end. But with Irish property still declining in value, there is likely to have been an impairment charge in Q1,2012 which may well have wiped out any profit but we won’t get further information on impairments until the Q2 accounts are published.

(10) Overall cash at NAMA was €4.5bn at the end of March 2012 which continues to be healthy. Since the end of March, NAMA loaned €3.1bn to IBRC which it has now received back, and it has now redeemed a further €2bn of its bonds, so the Agency continues to sit on a healthy cash mountain, but remember that NAMA has disposed fo 25% of its assets and redeemed just 10% of its bonds, so obviously it should be healthy, but as NAMA redeems more its bonds, the cash position will become far tighter.

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This is just not a good week for Priory Hall developer, Tom McFeely. A warrant, courtesy of Dublin District Civil Court, is out for his arrest for non-payment of a €24,000 debt. His €10m house on Dublin’s upmarket Ailesbury Road is set to be seized in a NAMA repossession. And yesterday, the Agency made a fresh application against him in Dublin’s High Court.

The new application (reference number 2012/2880S) was made by National Asset Loan Management Limited whose solicitors are Alfred Thornton and Company, which is, I think, the first time NAMA has used this firm – it doesn’t appear a large undertaking and its website is currently “under construction”.

The respondent is solely Thomas McFeely and as is usual in newly-filed applications, there is no solicitor on record for the respondent.

This is the second application by NAMA at Dublin’s High Court against Thomas McFeely this year. It is believed the earlier application was to deal with the repossession of the house on Ailesbury Road.

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. NAMA generally doesn’t comment on individual legal cases.

So far this year, NAMA has launched 20 separate actions in Dublin’s High Court and has been on the receiving end of six.

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Despite only spending a measly €355,000 on portfolio management fees for the first three months of 2012 – an expense heading which includes receiver costs for which NAMA has budgeted to spend €33m in 2012 – the Agency continues to appoint receivers with gusto. Yesterday’s edition of Iris Oifigiul reveals that the Agency has added seven more companies to its bag.

New Quarter Limited is jointly owned by NAMA Top-10 developer, Bernard McNamara and Durkan Residential Limited. Its directors are Barry Durkan and Patrick Durkan. And NAMA had Declan Taite and Patrick Brennan of RSM Farrell Grant Sparks appointed receivers of 19th July, 2012.

On 25th July, 2012 NAMA had Simon Coyle of Mazars appointed as receivers to Blackthorn Securities Public Limited Company whose directors are Derek O’Leary and Reginald Stuart Tuthill. The company has eight shareholders – Alan Woods, Christian Carroll, Culpepper Limited, John O’Donovan, Peter Walsh, Reginald Stuart Tuthill and Trentmount Limited (Derek and Belinda O’Leary company).

On 24th July, 2012 NAMA had Simon Coyle of Mazars appointed as receivers to  Sandyford Forum Developments Limited whose directors/owners are Derek O’Leary and Reginald Stuart Tuthill.

Maycombe Developments Limited is owned by Derek O’Leary and Reginald Stuart Tuthill and NAMA had Simon Coyle of Mazars appointed as receiver on 24th July, 2012

Glenville Hotel Investments Limited whose directors are William O’Connor and Randal Doherty and whose company secretary is 75-year old George Valentine Byrne had Declan Taite and/Anne O’Dwyer of RSM FGS Partnership appointed receivers on 23rd July, 2012. The company is jointly owned by Eileen Doherty and Randal Doherty.

Fairview Building Company Limited is the Dublin-based construction company owned by Martin Doran and Michael Doran, whose flagship Ellen Construction Limited was recently the subject of a NAMA receivership. Ken Fetherston owns one third of the company. Both Martin and Michael Doran have successfully declared themselves bankrupt in the UK. Declan Taite and/Anne O’Dwyer of RSM FGS Partnership appointed receivers on 23rd July, 2012

Fernland Limited is the Dublin based developer owned by brothers Michael and Martin Doran and brothers Ken Fetherston and Michael Fetherston. Bernadette Fetherston is also a director. NAMA had Declan Taite and/Anne O’Dwyer of RSM FGS Partnership appointed receivers on 23rd July, 2012.

Remember you can see a comprehensive list of Irish foreclosure action by NAMA here and in this regularly updated spreadsheet.

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Image of the Week

Vincent Browne – image screengrab above via TV3 Tonight with Vincent Browne – not looking at all happy with his little chair whilst interviewing the NAMA chairman Frank Daly after the publication of the 2011 NAMA Annual Report. Or maybe, he’s just not happy with NAMA’s adoption of Hope as a policy.

Non-image of the week goes to the former Anglo chairman Sean FitzPatrick who, when transported from the Bridewell garda station to court was allowed drape his blazer over his cuffed hands. Yes, a former banker was in handcuffs this week.

Quinn saga programme highlights of the Week

“Never before have I seen such conduct on the scale demonstrated here nor with the deviousness with which this scheme has been operated” Mr Justice Peter Kelly commenting on the Quinn family scheme to place assets beyond the reach of Anglo

“I work in Joe Duffy part time — it’s important to remember that” Karen Quinn (nee Karen Woods) defending the €320,000 she reportedly received since April 2011 from a Russian company connected to the Quinns. She is reported to be working part-time at a Dublin car dealership, where at present there is an advertised vacancy for a full-time receptionist paying €21,000 per annum. Still, there’s more to job satisfaction than just money…

NAMA will now say anything quotes of the Week

“Now what I think you are glossing over is that there is another seven or eight years to go in NAMA, and in that seven years in aggregate, property prices recover by something like seven, eight, nine, 10% which is not an unreasonable proposal, remember recently the Central Bank indicated that property prices may have actually fallen below their economic level.” NAMA chairman Frank Daly, July 2012

“Some commentary has suggested property market will need to recover to 2004-2007 levels for NAMA to break even. The scale of recovery required is, in fact, a more modest 10% over the lifetime of NAMA taking into account the 5% of subordinated debt (€2bn)” NAMA chairman Frank Daly, September 2010

Irish residential property has declined 23% between September 2010 and June 2012. Irish commercial property has declined by 20% between September 2010 and June 2012. Yet NAMA now needs just 6-10% of a recovery to break even, whilst in September 2010 it needed 10%. Outstanding! And by the way, in September 2010 they were “taking into account the 5% of subordinated debt” which NAMA doesn’t need pay if it makes a loss, no such reference in July 2012. In actual fact, NAMA will need a blended increase of around 24% to existing property prices – see figures at top of this page – AND it will need cover its operating and interest costs, if it is to break even.

But NAMA is now saying that an increase as low as 6% will do the trick!

“What I’m saying is that based on our projections, our analysis, we are confident. And that’s an objective view of projections, figures, macros and not all our own.” NAMA chairman Frank Daly, July 2012.

You can’t blame an Agency for trying to build trust in the property market. After all, the Agency deals primarily in the property market and a loss of trust would be very punishing indeed. Truth be told, the CSO says mortgage-sales prices are down 50% at present. Others say they are down by 60% but if they are right, that indicates that cash transactions are down by 80%-plus if you think cash comprises 30% of the market, which doesn’t seem plausible as presumably valuers wouldn’t sign off on such high mortgage valuations knowing that cash prices were so much lower. Professor Morgan Kelly predicted falls of up to 80%. Commercial property is down by 67% according to both the JLL and SCSI/IPD indices but prime Dublin still costs twice as much as prime Belfast and the National Competitiveness Council said earlier this year that commercial property was still overvalued. The view on here about property prices over the medium term is who knows, but recoveries cannot be accurately predicted with spreadsheets or spreadsheet macros – if they could, we’d all be billionaires!

On the face of it, it looks as if Simon Carswell has made a true hames of this NAMA report. €1bn profit a year? Meaning €9bn between 2012-2020? But, in a detailed interview with the NAMA CEO, we get the following “we are probably going to be producing pre-impairment profits of well over €1 billion a year so we would believe at this stage – with a cumulative impairment taken of €2.75 billion, absent anything that has taken place in the market – we are probably reasonably provided for at this stage”

NAMA made a pre-impairment profit of €133m in Q1, 2012 and given Irish residential property has declined 6% so far this year, and Irish commercial is down 4%, it is likely that post-impairment, there won’t have been any profit. So €1bn a year?

Shock of the Week

NAMA has spent just €23,000 on legal fees and €355,000 on receivers in the first three months of 2012, according to its Q1, 2012 management accounts published this week. Given that the Agency has a budget in 2012 of €25m for legal fees and €33m for receivers, the figures look distinctly odd. Mind you, NAMA continues to keep the accounting profession in German cars and has spent a more typical €562,000 on audit and accountancy services during the quarter. Still though, a measly €23,000 on legal fees?  Does this mean there are desperate hordes of besuited and bewigged ones now relegated to stalking the streets of Dublin chasing ambulances?

Paradox of the Week

The Broadcasting Authority of Ireland issued a statement about its intentions for investigating Denis O’Brien’s control over Irish media. At present, his Communicorp vehicle owns radio stations which have about a 15% national radio listenership share. But it is his interest in Independent News and Media, publishers of the Independent, Sunday Independent, Sunday World, Belfast Telegraph, Evening Herald and others that is causing concern. Denis owns nearly 30% of INM and is perceived to have recently emerged victorious over the O’Reilly family in the struggle for control of the group. Now “control” in this sense might not be what the BAI regard as “control”, but the BAI does conclude that Denis has a “significant interest” in INM though not what it regards as “control”. The paradox? The BAI says it has a statutory obligation to consider “the desirability of allowing any person, or group of persons, to have control of, or substantial interests in, an undue amount of communications media”

So if the BAI has concluded that Denis O’Brien does have a “substantial interest” in INM then why is the BAI not under a statutory obligation to consider the desirability of allowing Denis O’Brien have “substantial interests” in an undue amount of communications media? Or maybe having 15% of radio listeners and having a “substantial interest” in the most powerful newspapers in the country doesn’t count in the BAI’s eyes as “an undue amount of communications media”. A head-scratcher. “Desirability” has become a particular issue with Denis O’Brien after the Moriarity Tribunal made so-called “adverse findings” against him, findings which he has disputed but which nonetheless stand on record. Control of media might help soften that record however…

Runner-Up goes to NAMA and its legal action with the Information Commissioner, Emily O’Reilly in her role as Commissioner for Environmental Information.

This is the legal case that NAMA doesn’t want to talk about. The heroic Gavin Sheridan at thestory.ie has been trying for more than two years to have NAMA declared to be subject to environmental information requests on account of its status as a public body. NAMA has fought Gavin tooth and nail every step of the way, and even though Ireland’s guardian of transparency, the Information Commissioner has sided with Gavin, NAMA has continued its resistance in the courts, where this week it spent a couple of days trying to convince the courts that NAMA is not in fact a public body and was accordingly not subject to environmental requests. According to Gavin, he expects a decision “in the Autumn”, which means from September onwards and he is “50/50” about the outcome. NAMA uses the misdirection of being forced to hand over commercially sensitive information, should it lose the case, but the rules already provide for bodies to exempt themselves from providing such information. If Gavin, or more correctly the Information Commissioner wins then we might be able to force NAMA to provide us with a list of all its property – not just the foreclosed stuff – and we might also see what remedial work it has done on ghost estates, or – as in the case of the Gleann Riada block in Longford that it is presently demolishing – it has done nothing and spent nothing in securing, protecting and maintaining these estates. The paradox is that NAMA keeps on telling us it is transparent and supports transparency as long as it doesn’t offend the NAMA Act. However the NAMA Act is not being used very much in these proceedings and NAMA is now scaremongering that a victory for Gavin here, would mean other bodies become subject to environmental requests. The spectacle of the State spending considerable sums in suing itself hasn’t gone unnoticed on here either.

If Gavin wins, maybe the first information request might be how much NAMA has spent on legal fees in resisting being classified as a public body…

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The Romanian dictator Nicolae Causescu knew his days were numbered on 21st December 1989 when, from a balcony in one of Bucharest’s great squares, he starting giving a typical speech to crowd who suddenly started chanting “Timisoara”, the name of a town in west Romania where the Causescu regime had killed protestors days before. A week later, on live TV, the Causescus – equally repugnant husband and wife – were no more, after being summarily tufted out the door to an anonymous yard, after a trial of sorts, and shot. And in early December 2012, Minister for Finance Michael Noonan should not be surprised if he hears the chant “26th July” as he unveils his budget for 2013. The Memorandum of Understanding with the Troika obliges us to raise an extra €1.25bn in taxes in 2013, though recent statements from the Department of Finance suggest that taking into account the full year effect of tax hikes in 2012, that the true extra tax requirement is closer to €1bn

Yesterday, the NTMA managed to blow this sum in one fell swoop.

Remember the recent Fiscal Compact referendum where the central argument advanced by the pro-Compact side was that the Compact would give access to an insurance fund, the ESM, which would fund this country at sustainable rates in 2013 if the country was unable to get access to traditional bond markets at sustainable rates?

Well yesterday, we did get access to traditional bond markets and raised €5.2bn – €4.2bn of new money and we rolled over €1bn of debt that was falling due in 2013 and 2014. Not only that, but we paid rates which were marginally below those quoted on secondary markets. So we validated the notional rates that we hear quoted by Bloomberg each day and we raised €5bn which pushes the date by which we need more funding out to the end of 2013/start of 2014. So, why the dramatic criticism above?

We’re paying rates which are double those of the rates from the ESM, the “insurance fund” to which the “yes” vote in May 2012 was supposed to guarantee access. Over the lifetime of the €4.19bn of new bonds and the €1bn of rolled-over bonds, we can expect to pay an EXTRA €954m compared with our cost of funding from the ESM (see * and ** and *** below).

Now it should be said that the tax adjustment we’re obliged to make in 2013 must be repeated each year going forward and that we have further adjustments to make in 2014 and 2015 and beyond. So substituting market funding for ESM funding would not have completely obviated the need for further tax adjustments.

But yesterday, at a time when this funding is not needed, the €490,000-a-year plus 80% potential bonus CEO of the NTMA, John C Corrigan decided to issue debt at interest rates which suggest a lifetime premium of nearly €1bn over rates supposedly available from the ESM.

July 26th.

*The statement from the NTMA, with the results of the bond sale, say that €4.19bn of new funds was raised between 5-year and 8-year bonds, the former paying 5.9% and the latter 6.1% and the weighted average is 5.95%, presumably meaning there was €3bn of 2017 bonds and €1bn of 2020 bonds. Newspaper reporting states the Government “borrowed €3.9 billion at a rate of 5.9 per cent on a new five-year bond and a further €1.3 billion on an existing bond due in 2020 at 6.1 per cent”

** The interest rate on existing ESM borrowings ranges between 0.29% for five month funding, 1.73% for 3-year funding, 2.75% for 5.5-year funding and 3.6% for 10.2 year funding. The implied 5-year rate is 2.55% and the implied 8-year rate is 3.2%

*** €3.9bn for five years at 2.55% and €1bn at 3.2% for 8 years compared with €3.9bn for five years at 5.9% and €1.3bn for 8 years at 6.1%

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