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Archive for May 9th, 2013

JanusMcDonagh

“The Irish market is very difficult, the economy is taking longer to recover than anybody expected and the financial institutions not in Nama are deleveraging as well. It’s a very competitive marketplace” NAMA CEO Brendan McDonagh, speaking in Madrid on 17th April, 2013

The NAMA CEO Brendan McDonagh was in Madrid last month at an event organized by the Irish embassy and moderated by the Financial Times. On 17th April, 2013 Brendan held forth on the Irish experience of NAMA, which is of particular interest to a Spanish audience given Spain’s inclusion of a so-called “bad bank” to deal with its banking problems. The joke on here before the seminar was whether Brendan would need an interpreter so that the audience would understand “billen” meant “billion”, “millen” meant “million” and “break even” meant a total loss of up to €15bn. There has been little reporting on the seminar which took place on 17th April but over the past day, Bloomberg has filed this report.

The audience in Spain is interested in the no-bullshit experience of NAMA because it now faces similar challenges with its bad bank, SAREB. And whilst NAMA seems to tell the domestic audience in Ireland at every opportunity that things are stabilizing, and that property prices are even increasing, the Spanish audience didn’t want that propaganda, it just wanted it straight.

And it seems Brendan told them “the Irish market is very difficult” which of course can cover a variety of factors including declining prices and lack of credit. But NAMA has announced €2bn of staple finance and is offering up to 75% loans to buyers of its property – mostly commercial but there have been instances of residential sales having staple finance also.

Back home in Ireland, NAMA talks about buyers participating “in the continuing recovery of the Irish commercial property market” – this is the market where prices were down 0.6-1% in Q1,2013 and rents declined by 3% in that same quarter. NAMA has been talking about stabilizing property prices since 2009, and since then, residential is down 32% and commercial is down 27%. And NAMA has been saying since 2010 that the property market is stabilizing. And although Brendan didn’t use the R-word in his reported words – sorry, no transcript of a speech has been made available – he did say that “the economy was taking longer to recover than anybody (sic) expected”.

Brendan also made reference to competition, which is not something we are used to hearing in Ireland – remember Minister Noonan telling us that NAMA didn’t compete with IBRC? – but the fact is that NAMA is competing with Bank of Ireland, AIB/EBS, Permanet TSB, Certus, Lloyds/Bank of Scotland Ireland, Ulster Bank/RBS, who have been deleveraging at a rate of knots. And it might not have been acknowledged by Minister Noonan, but NAMA is also competing with these companies for resources, like employees.

Sometimes, it is easier to be truthful with strangers.

UPDATE: 9th May, 2013. The presentation by Brendan on 17th April, 2013 is available here. It’s the stock NAMA presentation but a few slides are new. Haven’t seen this one before:

WhatsThatIntersection

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After Sean Dunne filed for bankruptcy on 29th March, NAMA was asked how many of its developers have now filed for bankruptcy outside (the Republic of ) Ireland. When asked the same question a year ago, NAMA said that approximately 20 had filed for bankruptcy elsewhere. However, NAMA declined to provide a up-to-date figure two weeks ago, and said that it would publish such information in its 2012 annual report which is now set to be published early this year in June 2013.

NAMA was also asked how much debt it has written off following foreign bankruptcies. And surprisingly it said it has written off no debt whatsoever. That is surprising because we have now reached the stage where those who went to London to file for bankruptcy have served their 12 months and are being discharged. For example the Grehans, who owed NAMA about €600m in total, were discharged at the end of 2012/start of 2012, but the first high profile NAMA bankrupty in the UK was that of Cork developer, John Fleming who filed for bankruptcy in November 2010 and was discharged in November 2011. John owed €1bn to his creditors with a sizable proportion owed to NAMA.

So, 18 months after his discharge, John is financially reborn and the slate is wiped clean. Yet NAMA has not written off a cent of what it was owed. NAMA says that it is awaiting the bankruptcy trustee to dispose of all the property. This seems almost incredible, 18 months after the discharge from bankruptcy and begs the question whether NAMA is overstating its profit by failing to write off the debts of those discharged from bankruptcy.

These are the parliamentary questions and responses.

Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Questions Nos 198 and 199 of 23 April 2013, when he stated the National Assets Management Agency advises that even there the bankruptcy is discharged, the bankruptcy estate continues until such time as all assets have been liquidated and the debt, insofar as possible, has been repaid and in relation to the discharge from bankruptcy in Britain of a person (details supplied) in November 2011, if he will confirm that NAMA has still not written off the unpaid debt originally owed by the person to NAMA, and that generally, NAMA has not yet written off any debt as a result of bankruptcy by its debtors in foreign jurisdictions..

Minister for Finance, Michael Noonan: As previously advised, even where a bankruptcy is discharged, the bankruptcy trustee continues to deal with outstanding debt until such time as all assets have been realised and the debt, in so far as possible has been repaid.   NAMA advises that it is precluded from commenting on individual cases. As has also been previously advised, NAMA has not written off debt arising from debtor bankruptcy applications.

Deputy Pearse Doherty: To ask the Minister for Finance if he will confirm the total number of individuals who are debtors of the National Asset Management Agency who have filed for bankruptcy outside the jurisdiction of the State.

Deputy Pearse Doherty: To ask the Minister for Finance if he wil provide an estimate of the total amount of original par value debt written off by the National Asset Management Agency as a result of debtors filing for bankruptcy outside the jurisdiction of the State..

Minister for Finance, Michael Noonan:I propose to take questions 198 and 199 together.

NAMA is currently finalising its Annual Report and Financial Statements for 2012. I am advised that these will contain extensive information regarding its operations, including its insolvency activity and the locus of debtor bankruptcy proceedings. I am advised that the Report and statements will be published within two months.

NAMA advises that it does not write off debt as a result of debtors filing for bankruptcy outside the jurisdiction of the State.  Rather, it is a matter for the bankruptcy proceedings to deal with the outstanding debt. NAMA advises that even where the bankruptcy is discharged, the bankruptcy estate continues until such time as all assets have been liquidated and the debt, in so far as possible, has been repaid.

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Last week, NAMA announced that it has at last sold its Project Aspen portfolio of €810m par value loans that related to Dublin developer, David Courtney. But what about Project Club, the c€300m portfolio which relates to loans to developer, Eamon Duignan. Sources are this afternoon claiming that NAMA has pulled the sale amid general concerns that borrowers are teaming up with potential buyers which is undermining the reputability of NAMA’s processes.

You will recall that when NAMA sold Donal Mulryan’s €250m of UK loans to Morgan Stanley that Donal then became a consultant to Morgan Stanley after the sale. Out of sight, out of mind it seems and the involvement of Donal never made news in Ireland. But in the case of the recent sale of David Courtney’s Project Aspen, there was considerable comment on David’s involvement with Starwood pre-sales and before the portfolio was offered to the market and that he will act as a consultant for a period post-sales.

In the case of Project Club, NAMA delayed bringing it to market following criticism of its failure to provide a valuation to bidders on Project Aspen – the absence of a valuation, which would be shared with all potential bidders, was seen as unusual and is understood to have had a deterrent effect on bidding generally. However, NAMA duly went about getting a valuation of Project Club after the criticism with the previous portfolio. Now it seems that NAMA has become sensitive about borrowers teaming up with potential bidders for single-borrower portfolios, and there has been some unsubstantiated talk of Eamon Duignan having an involvement with a potential buyer, Patron Capital Partners.

NAMA and Patron were both asked for comment, but there hasn’t been a response at time of writing.

A fortnight ago, the Sinn Fein finance spokesperson Pearse Doherty challenged Minister for Finance Michael Noonan about borrower involvement in single borrower portfolio sales. It seems NAMA has taken the concern on board. If the story is confirmed, it would seem that it won’t stop NAMA selling loan portfolios, it will just mean that loans from different borrowers will in future be packaged for sale so as to prevent any particular borrower conferring benefit on a potential bidder.

This is the parliamentary question and response:

Deputy Pearse Doherty: To ask the Minister for Finance following news that the National Asset Management Agency is selling large portfolios of loans which bundle together loans to a single borrower, if he is concerned that the borrower may derive a benefit from providing pre-sale advice to certain bidders. [18471/13]

Minister for Finance, Michael Noonan: I am advised by NAMA that it cannot preclude market participants from approaching debtors to discuss their property assets or to indicate potential interest in acquiring either properties or loans. Nor can NAMA preclude debtors from engaging with such potential purchasers. To do either would be counterproductive and could stifle normal commercial discussions in the property market and in particular could discourage international investors from exploring acquisition possibilities in Ireland. However, NAMA has very clear rules regarding the open marketing of loans or of properties on which it holds security.

As set out in response to recent Parliamentary Questions on the topic of NAMA loan sales [44286/12, 44287/12, 44288/12, 44189/12, 1549/13, 8753/13, 8754/13], NAMA has adopted a very thorough approach in line with accepted international market best practice for the sale of loan portfolios. As part of the formal sales process, potential purchasers are required to provide an undertaking that they will not engage with the debtor or other obligors at any stage during the sales process. Both debtors and potential purchasers are aware that the infringement of agreed protocols or undertakings may have an impact on NAMA’s decisions as to whether and to whom it sells a particularly portfolio. Furthermore, where NAMA approves the sale of any loan or approves the sale of any secured property by a debtor, it requires a confirmation that the purchaser is not connected to the debtor or other obligors.

Having ensured, as far as possible, that the sales process is conducted on the basis of all parties having equal access to the necessary information at the same time and that such primary sales are not made to the relevant debtors or to connected parties, NAMA advises that it has no legal right to intervene in any further future management or sales of the loan or underlying property in question post disposal.

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CSOHousingApr13

This morning, Ireland’s Central Statistics Office (CSO) has released its inflation figures for April 2013. The monthly headline Consumer Price Index (CPI) was flat in April 2013 compared to the previous month, and is still only up a modest 0.5% year-on-year. April’s results mirror those of Sept 2012-March 2013 and continue a subdued annual inflation trend seen in recent months compared with the 2%+ that pertained before January 2011.

Housing has stopped being the biggest driver of annual inflation, mostly because mortgage costs have been declining – by 6.8% in the past year, as ECB rate cuts and greater scrutiny of variable mortgage interest rates take effect. Just a few months ago, mortgage interest was rising by 20% per annum, and as mortgage interest costs account for over 5% of the basket which measures inflation, the impact on inflation was substantial.

Energy costs in homes on the other hand, which account for over  5% of the total basket examined by the CSO, have risen by 4.4% in the past 12 months, mostly driven by the 9% price hikes at the ESB, and in October 2012 at Bord Gais.

CSORentsApr13

Elsewhere, private rents rose by a stonking 1.0% for the second month in a row – this after modest increases in February and January but bigger increases in previous months: 0.7% in December, 0.6% in November, 0.7% in October  and  0.9%  in September 2012. Over the past year, such rents are up by 5.0% according to the CSO – there is some small rounding in the figures above which show 5.4%. The results today are supported by the PRTB index launched yesterday which shows actual rents nationally up by 2% in the past year, and the Daft.ie asking rent index which suggests rents are up nearly 3%. There are no doubt regional and property-type variations, yesterday’s results from the PRTB suggested rents on apartments in Dublin were still declining but houses were increasing.

It seems that in our financial crisis, the big correction in rent took place in 2009 with a 19% maximum decline, compared to a decline of just 1.4% for all of 2010. Since the start of 2011 there has been a 9.3% increase (mostly recorded in February and October 2011 and February and September/October/November  2012 and March/April 2013).

Rent assistance levels have not been affected by the recent Budget 2013, neither the rates nor contribution have changed.

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In the Dail this week, Minister for Finance Michael Noonan provided details of the PR expenditure at the  NTMA, an umbrella agency which encompasses NAMA. We learned that Gordon MRM, the PR agency most associated with NAMA, received just over €200,000 a year during the past three years or a total of €660,000 to the end of February 2013. This company was re-appointed to the role after a competitive tender process involving four other companies, at the end of 2012. It has done a reasonable job of promoting NAMA during the past three years, and it must be said that aside from the Enda Farrell affair, NAMA has emerged reasonably unscathed in terms of its reputation, though credit for that clean sheet is broad-based. If only Gordon MRM could gets its archive of press releases on its website to work…

But what was unexpected in Minister Noonan’s response is the NTMA has also engaged the British PR company which is the respondent in a Paddy McKillen defamation action in Dublin’s High Court. Powerscourt has been paid just over €250,000 in the last 3.5 years by the NTMA though €160,000 was spent in 2010 alone. On 27th February 2013, developer and businessman, Paddy sued Powerscourt and one of its executives, Conal Walsh in Dublin’s High Court.

A statement was made by Powerscourt on 30th November 2012 on behalf of the Barclays – the two brothers fighting to take control of three London hotels in which Paddy McKillen has a 36% stake – a statement which contained something which Paddy regards as, according to the Sunday Independent, “defamatory of him as they questioned his motivation for bringing proceedings before the UK Court of Appeal” in the latter half of 2012. You might recall that following Paddy’s defeat in the London High Court last August 2012, he was firstly hit with legal costs which have been estimated at €25m. We learned from the Sunday Times recently that Paddy sought what was described as an emergency loan of GBP 5-5.9m last October 2012 at IBRC; approval for that loan application was given by IBRC though it seems that Paddy funded those partial legal costs from elsewhere. Paddy sought, and was granted, permission to appeal the UK High Court judgment, the appeal was heard at the start of February 2013 and a judgment is expected any day now.

Paddy is, at present, complaining that there is what is described by the Irish Times as a “sustained strategy” against him involving NAMA and the Department of Finance. The NTMA’s engagement of Powerscourt may just exacerbate that sense of grievance Paddy is suing associates of the Barclays as well as Powerscourt and its executive for defamation in Dublin. Separately, he is suing NAMA for breach of confidentiality and privacy. He has launched legal action against the Sunday Times and one of its journalists Mark Tighe over a story which a judge has partly injuncted. And any day now, he will learn the outcome of his appeal against a UK High Court decision.

The NTMA expenditure on PR emerged from parliamentary questions asked by the Sinn Fein jobs and enterprise spokesperson, Peadar Toibin and are here:

Deputy Peadar Tóibín: To ask the Minister for Finance if he will provide, in tabular form, a list public relations companies that received payments from either the National Assets Management Agency, the National Treasury Management Agency, the National Development Finance Agency, the State Claims Agency or the National Pension Reserve Fund; the overall cost of these payments from each agency named and the level of payments made by each agency to each company listed in respect of work carried in the years 2010, 2011, 2012 and to date in 2013. [21365/13]

Deputy Peadar Tóibín:To ask the Minister for Finance the number of companies or individuals that recently tendered for the renewal of the public relations contract for the National Treasury Management Agency; and if the NTMA secured a reduction in the rate charged in the previous contract. [21366/13]

Minister for Finance, Michael Noonan: I propose to take Questions Nos. 145 and 146 together.

The National Treasury Management Agency (NTMA) does not maintain an internal press office. Instead, its internal communications resources are supported by an external service provider (appointed following a public procurement process) – currently Gordon MRM – in order to offer a full press office and communications service (including out-of-hours contacts for the media) across all the NTMA’s business areas: Debt Management, National Asset Management Agency (NAMA), National Pensions Reserve Fund, National Development Finance Agency, State Claims Agency, NewERA and, during 2010 and 2011, the Banking Unit.

These arrangements were initially put in place during 2010 in light of a significant increase in the volume of domestic and international media queries being received by the NTMA and associated bodies. In September 2012 the NTMA retendered for the provision of these services. A total of five companies submitted tenders. Following the tender evaluation process the NTMA awarded the contract to Gordon MRM in December 2012.

The initial contract, in place to end-2012, was based on an hourly rate for services provided. During the term of this contract a 20% reduction in the hourly rate was agreed with effect from June 2011 until the end of the contract. The new contract, which commenced in January 2013, is based on a fixed fee and it is anticipated that this will result in a significant reduction in the overall fees paid by the NTMA.

NAMA draws on the NTMA’s shared services in a number of areas including its outsourced press office facility. NAMA reimburses the NTMA in respect of the costs of these services attributable to NAMA.

The overall costs incurred for the provision of the services above (excluding VAT) were as follows:

2010 – €207,255*

2011 – €205,388 (of which €112,353 was charged to NAMA)

2012 – €223,723 (of which €142,653 was charged to NAMA)

2013 – €24,488 (to end-February) (of which €12,000 was charged to NAMA).

* In 2010 costs were not specifically attributed to NAMA. NAMA was charged a proportionate share of the NTMA’s third party service costs which included Gordon MRM.

In the light of the sovereign debt crisis the NTMA also engaged Powerscourt – a London based communications consultancy – for international communications initiatives in the funding and debt management area. Total costs (excluding VAT) incurred for the provision of the services provided by Powerscourt were as follows:

2010 – €160,334

2011 – €74,395

2012 – €10,257

2013 – €12,103 (to end-February).

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