Archive for March 16th, 2013


The news from Cyprus remains sketchy, but as part of a €17bn bailout of the tiny east Mediterranean country, it seems that ordinary depositors in its banks are to lose part of their deposits whilst senior bondholders will walk away with 100% repayment. “Pari passu”, the infuriating Latin expression meaning “ranking the same” that has been used in the past to advertise that depositors would be treated the same as bondholders seems to have been “non gradus anus rodentum” or “not worth a rat’s ass”. Most of the Irish media seems mostly to have started St Patrick’s Day celebrations early and this is really just too heavy for them, so let’s see if we can fill the gap.

It seems the €17bn bailout of Cyprus is akin to the €85bn bailout of Ireland. In our case, we contributed €17.5bn of our own funds from our national rainy day fund, the National Pension Reserve Fund, to the bailout. The contribution from the IMF, EU and bilateral loans came to €67.5bn. In the case of Cyprus, the Cypriots are contributing €5.8bn from the burning of depositors in their banks. Yes, depositors! There is now word whatsoever about any other contribution to the bailout, for example, from bondholders.

So if you’re a Cypriot depositor, you’ll lose 6.75% of your deposits below €100,000 and 9.9% of your deposits over €100,000. Banks in Cyprus are closed until Tuesday – they have a holiday, Green Monday on 18th March 2013 – and the haircuts will be imposed then. There are bars on electronic transfers between now and then, and queues of depositors outside banks usually open on Saturdays have this morning been disappointed and angered to be met with closed branches. To sweeten the deal, depositors will be given shares in the banks equivalent to their losses – at least there are debt for equity swaps in some banks in Europe!

There will also be a €1.4bn privatization programme, and a condition of the bailout is that Cyprus raise its corporate tax rate from 10% to 12.5%, the same headline rate as pertains in Ireland. The €10bn international component of the €17bn bailout will be coming from Europe.


You’ll find the latest European Commission forecasts for Cyprus here. In short its economy is contracting, unemployment is reaching our levels, its debt to GDP is just 90% but is rising. Its GDP is about €18bn and it has a population of just 1m.

UPDATE: 16th March, 2013. A statement has been issued by the EuroGroup of 17 EuroZone finance ministers which welcomes the Cyprus bailout. It doesn’t give very much detail but refers to the “bail in of junior bondholders”. There is no mention whatsoever of senior bondholders. In Ireland, burned €14bn from the €26bn of junior bondholders that were repaid. However, apart from a tiny number of senior bondholders at IBRC who face a haircut after the liquidation, the others have been repaid 100%.


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[You will find the latest accounts for MAR Properties Limited here and the accounts for MAR (Argyle) Limited here]

In the beginning it was all going to be so different. There would be a Memorandum of Understanding, followed by Heads of Terms followed by a full Agreement between the NAMA developer and NAMA, and in many cases the wife of the developer. All would be solemnly signed by all the parties in a perfectly pyramidic approach to securing agreement between developer and NAMA. In the event, and after NAMA failed to even get a single agreement signed a year after it started acquiring loans, the pyramidic approach was abandoned and developers reported that NAMA was merely signing off on business plans, but they complained that agreements were only lasting a matter of months before they had to be renewed. In nearly all cases, NAMA has all the cards – or at least all the money – so NAMA calls whatever shots it wants.

It now seems that instead of any short term agreed business plan, NAMA is merely giving the nod and wink to developers. This week, the accounts for one of Northern Ireland’s main NAMA developers, MAR Properties, were published. The accounts are for the year ended December 2010 but have only been signed off in the last few days. Also published this week are the accounts of a MAR subsidiary, MAR (Argyle) Limited, which made a loss of GBP 10m (€12m) in the year ended December 2010 and has net liabilities of GBP 12m (€14m). MAR (Argyle)’s accounts were actually signed off a year ago, but the description of the agreement with NAMA is nonetheless curious

“As explained in the going concern note on the accounting policies, the company has continued discussions with NAMA about its future borrowing needs to allow the company to trade through the current difficult market conditions. The directors going concern assumption is dependent on the continuing support of its shareholders and the acceptance of the directors’ business plan which has been submitted, reviewed and verbally agreed by NAMA”

MAR Properties itself turned in a loss of GBP 23m for 2010 and had group net liabilities of GBP 40m at that date. Bank of Scotland and Ulster Bank provide facilities to the group, in addition to NAMA. MAR has  a large number of subsidiaries operating in Northern Ireland, Scotland and England. The MAR group was founded in 1997 by Noel Murphy (“M”), Adam Armstrong (“A”) and William Rush (“R”) – the current directors are listed as Noel Murphy and William Rush only. The group developed residential and commercial property in Northern Ireland, Scotland and England. In January 2013, it sold the Cultra Railway Station in county Down. Some of its loans are in NAMA, and loans to MAR are understood to be one of NAMA’s largest exposures in Northern Ireland and no doubt NAMA will study the latest developments carefully. Just a week ago, Bank of Scotland moved on some of its Northern Ireland assets including commercial premises on Main Street and Castle Street in Bangor.

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This week saw the publication of the February 2013 IPD Monthly Property Index for the UK. The IPD (Investment Property Database) index is the only UK commercial index referenced by NAMA’s Long Term Economic Value Regulations (Schedule 2) and is used to help calculate the performance of NAMA’s “key markets data” shown at the top of this page.

The Index shows that capital values fell by 0.2% in February 2013, which follows declines averaging 0.3% per month since December 2011. Prices reached a peak in the UK in June 2007 and fell steadily until August 2009 when a rally started. Prices then increased by 15% in the year to August 2010 but have since been declining and are down by 4.0% in the last 12 months.

Overall since NAMA’s Valuation Date of 30th November, 2009 prices have increased by 6.5%. Commercial prices in the UK are now 37.0% off their peak in June 2007. The NWL index  falls to 779 which means that NAMA needs to see a blended increase of 28.4% in property prices across its portfolio to break even at a gross profit level (taking into account the fact that subordinated bonds will not need be honoured if NAMA makes a loss).

The table below shows the three subsectors in UK commercial property with an index for all three at NAMA’s valuation date of 30th November 2009 of 100. Offices have been relatively buoyant whereas industrial premises like factories and warehouses have been relatively flat.


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 GBP 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 commercial property to change -2.1%, 1.0%, 3.1%.3.6%, 3.9% and 3.5%  in 2012-2017.

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NAMA’s enforcement action shows no sign of let-up in 2013, with yesterday’s edition of Iris Oifigiuil revealing that the Agency has had receivers appointed to assets at another slew of companies.

First up is HP McCabe Construction Limited to which NAMA had Jim Hamilton and David O’Connor of BDO appointed statutory receivers of certain unspecified assets of HP McCabe Construction Limited on 11th March 2013. The directors are Pauline McCabe (38) and Helen McCabe (41). It is owned by John McCabe (10%), Angela McCabe (10%), Helen McCabe (10%), Pauline McCabe (10%), Sandra McCabe (10%), Alicia Daly (8.3%), Anne Daly (8.3%), Karina Daly (8.3%), Lorna Daly (8.3%) and Nadine Thompson (8.3%). In February 2013, there was some drama in Judge Peter Kelly’s court when NAMA had receivers appointed to the 8.38 carat ring owned by John McCabe’s wife, Mary. NAMA has already sued the McCabes in Dublin’s High Court and obtained judgments reported to be close to an overall total of €300m.

Secondly, NAMA had Mr. Declan Taite and Mr. Sean Kelly, both of RSM Farrell Grant Sparks Chartered Accountants appointed as statutory receivers to certain unspecified assets of Thomas S Joyce and Sons (Castlebar) on 8th March 2013. Its directors are Thomas Joyce (59) and Patricia Joyce. The company is owned by Sol Developments Unlimited. Back in 2011, NAMA obtained an injunction from Judge Kelly stopping the Joyces transferring a 2.5% interest in a property on Kings Road in Chelsea, London to their children.

Lastly, NAMA had Gerard Lyons of Deloitte & Touche appointed as receivers to certain unspecified assets of Loughmore Developments Limited on 13th March 2013. Its directors are Denis O’Connell (54) and Kady O’Connell (23). The Limerick-based development company is owned by Denis O’Connell.

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

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