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Archive for March 1st, 2013

NAMA’s enforcement action continues at a steady pace in 2013 and we learn from today’s edition of Iris Oifigiuil that the Agency has had receivers appointed to assets of Irish and European Properties Limited, which is developer Jerry Donovan’s company. On 22nd February 2013, NAMA had Simon Coyle of Mazars appointed as statutory receiver to certain unspecified assets which secured a loan to the company from Anglo Irish Bank.

The directors of Irish and European Properties Limited are Jerry Donovan (70) and Desmond Chauhan (57) and the company is 100% owned by Jerry.

Remember you can see the list of NAMA’s enforcement actions here and in this regularly updated spreadsheet.

UPDATE: 4th March 2013. The Sunday Business Post yesterday – not available online without a subscription – reports that Irish and European Properties Limited is a “Cork-based” developer, this despite the registered and trading addresses being in Dublin. Of more certain accuracy would appear to be the claim that the company had 12 mortgages from Anglo, and that the individual mortgages were for up to €3m. The most recent accounts for the company are from 2007 when it has assets of €83m and liabilities of €27m – ah, those Halcyon days!

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No wonder nine staff at the NTMA left in the month of January 2013 alone. That’s nearly 2% of the 500 staff in the organization which houses a number of agencies under its umbrella, the main agency being NAMA. We learned this week that NAMA has not paid, and will not be paying any bonuses to its 220-odd staff for their work in 2012.

In the Dail this week, the Independent TD for Donegal South West Thomas Pringle asked Minister for Finance Michael Noonan about bonuses paid to staff in organizations under his auspices. This is what the Minister responded in respect of the NTMA and you can find the full parliamentary question and response here. It is understood from NAMA that no bonuses have or will be paid to staff for 2012 and the payments “to employees on lower salaries who contributed significant additional work hours” were not NAMA employees but back office staff working at the NTMA.

Minister Noonan also reminded us of the salaries of the three CEOs in the NTMA and the 15% waiver each of the CEOs has agreed to in 2012. You will all be familiar with John Corrigan and Brendan McDonagh, but it was revealed that the CEO of the National Development Finance Agency, was paid €297,000. How many of you would be able to recognize that CEO – Brian Murphy?

BrianMurphy

“Information in respect of performance related payments made to National Treasury Management Agency (NTMA) staff is set out in the table below. All National Asset Management Agency (NAMA) staff are NTMA employees and are included in the table below.

The NTMA employed a total of 500 staff as at the end of 2012.

NTMAPerformancePay

In addition the NTMA made total payments of €170,364 to 74 employees and €140,500 to 59 employees in relation to 2011 and 2012 respectively. These payments were to employees on lower salaries who contributed significant additional work hours. The NTMA does not have formal overtime payment arrangements in place for staff.

The remuneration details of the chief executives of the NTMA, National Development Finance Agency (NDFA) and NAMA are published in the annual reports of the relevant bodies. The remuneration of the chief executives consists of basic salary, taxable benefits and a performance-related payment.The remuneration details for 2012 are as follows:

NTMACEOs

The chief executives agreed to waive 15% of their salaries following a request by the Minister for Finance and the adjustment in each case is reflected in the above figures. The chief executives waived any consideration for performance-related pay in 2012 (as they did previously in 2011 and 2010).

The chief executives’ pension entitlements do not extend beyond the standard entitlements in the model public sector defined benefit superannuation scheme.”

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Yesterday, NAMA launched two separate legal actions against two Liam Carroll companies in Dublin’s High Court. In both separate cases, the applicant is National Asset Loan Management Limited represented by Arthur Cox.

In the first case, ref 2013/140 SP, NAMA is suing Fabrizia Developments whose directors are listed as Liam Carroll (62), David Torpey (54) and John Pope (41).

In the second case, ref 2013/141 SP, NAMA is suing Danninger whose directors are listed also as Liam Carroll (62), David Torpey (54) and John Pope (41)

NAMA is only suing the companies, and not any individuals. As is usual with recently-filed cases, there is no solicitor on record for the respondents. Because this is Ireland, we can’t find out the basis of the action or remedy sought by NAMA. NAMA rarely comments on individual litigation.

So far this year, NAMA has launched seven actions in Dublin’s High Court and has been on the receiving end of 13, though 12 of these relate to deposits on a golf resort in Portugal.

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A slew of sacred cows are presently being slain with the special liquidation of Irish Bank Resolution Corporation. We know that depositors will be nursing losses of at least €93m. And yesterday we learned that credit unions are taking a hit of at least €13.4m from their deposits at IBRC. Mind you, it seems that practically all of the senior bondholders will be paid in full, either because they have already been repaid or because they are covered by the Eligible Liabilities Guarantee.

Having asked the question several times previously on credit union losses at IBRC, yesterday the Opposition finally extracted an answer from Minister for Finance, Michael Noonan in the Dail.

Minister Noonan told Deputy Michael Moynihan from Fianna Fail and Deputy Dessie Ellis from Sinn Fein that 16 credit unions appear to have “invested” in IBRC bonds which are covered by the €100,000 deposit guarantee scheme. So a maximum of €1.6m will be protected and the credit unions are expected to shoulder the remaining loss which will be at least €13.4m. Remember Minister Noonan recently shoveled €250m into the credit unions mostly to cover losses on bad loans but these losses at IBRC will also cost us all.

The full questions and response are here:

Deputy Michael Moynihan: To ask the Minister for Finance if he has engaged with the credit union sector regarding the implications for fixed deposit investment products held by its members arising from the liquidation of the Irish Bank Resolution Corporation; the role of the regulator in protecting the interests of credit unions in the liquidation process; and if he will make a statement on the matter.

Deputy Dessie Ellis: To ask the Minister for Finance the total volume of Irish Credit Union deposits or bonds in the former Irish Bank Resolution Corporation and if he will outline the impact of the liquidation of IBRC on Credit Unions.

Minister for Finance, Michael Noonan:  I intend taking Question No 58 and Question No 61 together.

I am advised by the Central Bank of Ireland that certain tracker bonds sold to credit unions which were liabilities of IBRC at the time of the liquidation have a structured deposit element which is covered by the Deposit Guarantee Scheme for that element of the product. As a result the first €100,000 of any claim from these depositors is covered under the DGS. The bond itself is not covered by the ELG scheme as it predates that scheme.

I understand that the total amount of Credit Unions investment in the bond is of the order of €15 million and that 16 credit unions may be affected.  As part of their regulatory requirements, credit unions are required to maintain realised reserves for the purpose of absorbing unexpected losses, including from unguaranteed losses.  This should be the first line of defence in such circumstances. Officials from my Department have met with the Irish League of Credit Unions on this matter and the credit unions affected have been advised to deal with the Special Liquidator.

The Registrar of Credit Unions at the Central Bank of Ireland is the independent regulator for credit unions.  The Registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members. It is a matter for the Registrar to engage with the credit unions affected in that context.

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NationwideBSFeb13Summary

The Nationwide Building Society has published its UK House Price data for february 2013. The Nationwide tends to be the first of the two UK building societies (the other being the Halifax) to produce house price data each month, it is one of the information sources referenced by NAMA’s Long Term Economic Value Regulation and is the source for the UK Residential key market data at the top of this page.

The Nationwide says that the average price of a UK home is now GBP 162,638 (compared to GBP 162,245 in January 2013 and GBP £162,764 at the end of November 2009 – 30th November, 2009 is the Valuation date chosen by NAMA by reference to which it values the Current Market Values of assets underpinning NAMA loans). UK prices are flat over the the past 12 months and are now 12.6% off the peak of GBP £186,044 in October 2007. Interestingly the average house price at the end of January 2013 being GBP £162,638 (or €188,790 at GBP 1 = EUR 1.1608) is 19% above the €158,323 implied by applying the CSO December 2012 index to the PTSB/ESRI peak prices in Ireland.

NationwideBSFeb13Detail

With the latest release from Nationwide, UK house prices have declined 0.1% since 30th November, 2009, the date chosen by NAMA pursuant to the section 73 of the NAMA Act by reference to which Current Market Values of assets are valued. The NWL Index is now at 779 (because only an estimated 20% of NAMA property in the UK is residential and only 29% of NAMA’s property overall is in the UK, small changes in UK residential have a negligible impact on the index) meaning that average prices of NAMA property must increase by a weighted average of 28.4% for NAMA to breakeven on a gross basis.

According to the Nationwide this morning, the outlook for 2013 is subdued but recent developments in the provision of credit may lift activity slightly, and their comment from last month still takes prominence in their analysis

“While activity in the housing market remains muted by historic standards, there have been tentative signs of a pick up in activity in recent months.  The Funding for Lending Scheme has achieved some success in bringing down mortgage rates, with some signs of a pick up in lending activity.”

The UK economy is suffering difficulties almost every bit as challenging as those in the EuroZone and Ireland. Sure, they have their own currency and they’ve printed GBP 300bn of it in an economy with a GDP of 1.5tn, to help inflate their problems away. And yet they appear poised for a triple dip recession.  In December 2012, the UK’s independent Office for Budget Responsibility published its latest fiscal outlook which forecasts GDP for 2012 at -0.1%, 1.2%, 2.0%, 2.3%, 2.7% and 2.8% (but as with all economic forecasts in the long term, all forecasters forecast a peachy outlook). Deficit:GDP is forecast as -5.7%,-4.6%,-3.7%,-2.8%,-1.4% and -0.4% between 2012-2017. Debt:GDP is forecast at 90.3%, 93.5%, 96.3%, 97.4%, 96.6% and 94.4%. Inflation is forecast at 2.8%,2.5%,2.2% for 2012-2014. It expects residential prices to increase 0.7%/ 3%/ 3.8%/ 4%/ 4% in 2013-2016 and commercial property to change -2.1%, 1.0%, 3.1%.3.6%, 3.9% and 3.5%  in 2012-2017.

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FrankDaly

At last week’s presentation by the NAMA chairman Frank Daly (pictured above) in Dublin, he stated that NAMA “expects to realise about €750 million by reversing asset transfers by certain debtors and taking charges over previously unencumbered assets – up from a previous estimate of €500 million.”

This claim raised some eyebrows, and some developers with knowledge of NAMA’s operations were skeptical about the claim. In the Dail this week, the Sinn Fein finance spokesperson Pearse Doherty quizzed the Minister for Finance Michael Noonan about the NAMA claim.

NAMA is saying “the granting of charges over additional security, where such security exists, is a required demonstration of a debtor’s willingness and capacity to work with the Agency to achieve the best possible outcome for the taxpayer and that debtors receive no consideration for providing such security as their NAMA debt obligations are generally in excess of such amounts provided to NAMA”

This is quite astounding if true. Developers, who by their general nature, tend to be shrewd businessmen who don’t yield anything they don’t need to, are putting €750m on the table for NAMA as a “willingness and capacity to work with the Agency”. Not only that, but NAMA has already obtained charges over such property worth an impressive €642m. In other words, the €750m isn’t pie in the sky, NAMA has already snaffled 86% of the €750m announced.

The Minister also said that NAMA requires “the reversal of asset transfers to relatives and others, where they have occurred.“ Of course some of these transfers might be iffy, that is, they might have been executed at a time when the developer might have been considered insolvent. Other transfers however, might be perfectly lawful as part of the risk and wealth management that rich folks do.

So NAMA’s achievement is on the face of it very impressive indeed.

Minister Noonan was also asked for the basis of the quite staggering €750m of assets it says it expects to acquire but there was no response to that question.

These are the full parliamentary questions and responses.

Deputy Pearse Doherty: To ask the Minister for Finance further to the announcement by the National Asset Management Agency on 21 February 2013 that it expects to realise about €750 million by reversing asset transfers by certain debtors and taking charges over previously unencumbered assets up from a previous estimate of €500 million money realised from these sources will be used to pay down debts owed to the taxpayer; if NAMA can confirm if any of these transfer reversals were made as a condition of approving a business plan; and if so, the volume and value of transfer reversals made under this condition..

Deputy Pearse Doherty: To ask the Minister for Finance further to the announcement by the National Asset Management Agency on 21 February 2013 that it expects to realise about €750 million by reversing asset transfers by certain debtors and taking charges over previously unencumbered assets up from a previous estimate of €500 million money realised from these sources will be used to pay down debts owed to the taxpayer; if NAMA can confirm the actual volume and value of asset transfer reversals achieved to date; and the basis for the valuation of the asset transfer reversals..

Deputy Pearse Doherty: To ask the Minister for Finance further to the announcement by the National Asset Management Agency on 21 February 2013 that it expects to realise about €750 million by reversing asset transfers by certain debtors and taking charges over previously unencumbered assets – up from a previous estimate of €500 million money realised from these sources will be used to pay down debts owed to the taxpayer if NAMA can confirm if any consideration was provided to the developer or the transferee in return for agreement to reverse the transfer..
Minister for Finance, Michael Noonan: I propose to take questions 96, 97 and 98 together.

NAMA advises that, to ensure that debtors repay their debt to their full capacity, it requires, inter alia, that they provide security over unencumbered assets not previously pledged as loan security, where such assets exist, and the reversal of asset transfers to relatives and others, where they have occurred.

NAMA advises that, in this way, since inception to date it has obtained charges over additional security with an aggregate value of approximately €642 million, and that it is in the process of taking security over further assets identified in the course of its intensive engagements with debtors.  In the past week, the NAMA Chairman publicly stated that the Agency expects, after all negotiations have completed, to obtain about €750 million by taking charges over previously unencumbered assets and by reversing assets transfers by certain debtors. NAMA advises that the realised proceeds from these sources will be used to pay down debts owed to the taxpayer by these debtors.

NAMA advises that the granting of charges over additional security, where such security exists, is a required demonstration of a debtor’s willingness and capacity to work with the Agency to achieve the best possible outcome for the taxpayer and that debtors receive no consideration for providing such security as their NAMA debt obligations are generally in excess of such amounts provided to NAMA.

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