Archive for the ‘NAMA’ Category

Farewell from NWL

Well that day has finally arrived.  After 3.5 years and 2,700 blogposts, this is the final NAMA wine lake blogpost. I truly regret that I can’t continue something that has become more than full-time and has stopped me leading anything like a normal life.

There was going to be a much longer farewell blogpost but that is not to be, though I will include the already-drafted section on NAMA itself below*

The 2,700 blogposts will remain online – from emigration to bank-controlled hotels to political pay/perks and centrally of course, NAMA, there are thousands of hours of original research on these pages, some not available elsewhere. Commenting has now been closed, but the body of nearly 20,000 comments will remain. The jagdipsingh2008 email address will be permanently closed on Sunday next and will have the digital equivalent of concrete poured over it, so the thousands of messages received on here in confidence will forever remain confidential. The Twitter feed has now ceased.

To the audience, thank you for visiting and I hope the blog delivered what it said on the tin – to be provocative, engaging and contain real information. To commenters, you have added a wealth of knowledge, opinion, humour and links which has dwarfed the utility of the blog otherwise. To those who contacted the blog in confidence, your information and insight/opinions have extended what was the offering otherwise Thank you all.

Sin a bhfuil.

*“It is flattering to hear NWL being sometimes referred to as to most authoritative source for what is going on at NAMA. It’s also depressing because I know how little is reported on these pages. The most common question asked by the public about NAMA is “how is NAMA doing” and the most authoritative reply I can give you on here is “I don’t know”.

You see, you might think that you can assess NAMA’s performance by reference to its impact on individual properties or loans eg NAMA bought Developer A’s €150m loan for €100m and NAMA was subsequently repaid €150m when it sold the loan or managed the property, that would be an impressive success, but we never know in respect of an individual loan what its par value is, what its NAMA acquisition price is or generally the disposal value. So on an INDIVIDUAL basis, we can’t assess NAMA’s performance.  NAMA refuses to provide details on individual sales because of the legislation under which it operates though I have no doubt NAMA itself welcomes the lack of scrutiny which might lead to it being bogged down in the minutiae of constantly defending itself (though it might also reveal instances of poor performance).

So, we look to the OVERALL performance in the financial accounts, but here, the figures are so distorted by (valid) accounting conventions that again, we don’t really know what’s happening. At this point, most cynics say NAMA is taking advantage of the conventions to hide massive losses but you can’t conclusively say that. Two of the main distortions are the accounting policy which stops NAMA recognizing profits on an individual loan until all the loans associated with the relevant developer are disposed of, eg if Developer A has two loans from NAMA, one for €150m which NAMA acquired for €100m and another for €50m which NAMA acquired for €25m. If NAMA disposes of the first loan for €150m, then it has made a profit, but NAMA won’t report that profit until it deals with the second loan, and the second loan might be resolved at a loss of €20m. NAMA does indicate the profits it has not accounted for, but NAMA doesn’t indicate the quality of unresolved loans with the same developers.

The second convention which really distorts NAMA’s overall performance is the way in which financial institutions generally, account for the value of their loans. The estimate on here is that the property underlying NAMA’s loans has dropped by more than €7bn since NAMA acquired the loans, but NAMA has written off less than half that, because accounting conventions allow NAMA to estimate the future cash flow from loans and to pay limited attention to the underlying property, and NAMA is in the view on here, overly optimistic in its future cash flow estimates. So, you can’t rely on the accounts for an OVERALL assessment of NAMA’s performance.

So in response to the question “how is NAMA doing”, the ready response on here is “I don’t know”

Will NAMA make a profit by 2020? Who knows, none of us has a crystal ball. I would have said that if the broader economy stabilizes by the mid 2010s, and grows at a near 3% in 2016-2020, then NAMA could return a modest profit based on how it currently operates. A lot of its ultimate performance however, will depend less on its own actions and more on the general economic environment.

Lastly, NAMA staff – are they any good? NAMA staff are criticized for many things from various quarters: being petty, intimidating and vindictive. And their performance is criticized for being slow, not being commercial enough, dogmatic and inflexible, and unintelligent. These are points of view of course. But, what appears to be universally agreed – even by detractors – is that they are hard-working, honest, accomplished and making progress in what is one of the most high-profile and politically-charged organizations in a country that invented the term “gombeen politics”. NAMA might have been a different beast if it was led by Ryanair’s Michael O’Leary but Michael O’Leary wasn’t available and we lobbed the NAMA baby into the safe hands of Brendan McDonagh – conservative, careful, considerate, risk-averse accountant in the civil service mould. And so far, he has delivered to the expectation of those that know him. The one big criticism on here of NAMA is its failure to at least kick up a stink in 2010 when it became clear that property prices were still tanking, so that the NAMA valuation date could be changed, which would have meant NAMA paying far less for the loans, maybe €5-10bn less, which would mean that NAMA’s performance today was more impressive, though it would have left a further hole in the banks which needed to be filled with a further bailout. Furthermore, NAMA is not an organization to rival the red-in-tooth-and-claw asset management companies, but for a politically inspired agency, it has very impressive staff overall”


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According to the US court service, PACER, there have been 52 filings so far in Sean Dunne’s bankruptcy in Connecticut – the betting is that by the time this bankruptcy is resolved there will be a multiple of 52. Yesterday’s filing is by Sean’s wife, who is now styled “Gayle Killilea Dunne”, not Gayle Killilea and not Gayle Dunne. Gayle’s request is to be recognized as a notice party in the bankruptcy under Rule 2002 and Rule 9010 of the Rules of Bankruptcy Procedure. Rule 2002 applies to “Creditors, Equity Security Holders, Administrators in Foreign Proceedings, Persons Against Whom Provisional Relief is Sought in Ancillary and Other Cross-Border Cases” and requires the applicant to be treated as notice party to the bankruptcy proceedings. Rule 9010 appears to simply allow the notice party to be represented by a lawyer.

Gayle has engaged Connecticut law firm Reid and Reige and her specific lawyer is Eric Henzy, described on his bio at the firm as practicing in “business bankruptcies and workouts and business and commercial litigation”.

It should be stressed, if it isn’t apparent already, that it is only Sean Dunne who has filed for bankruptcy; by all appearances, Gayle’s finances appear to be hale and hearty and she is financially separate from her husband. It should also be stressed that there is no separation or divorce proceedings chez Dunne, and Gayle’s Irish solicitors, Clerkin Lynch have made that clear this week, though that story appears no longer to be online. [CORRECTION: the Sunday Times story is accessible here]

The application is here.

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Welcome to another depressingly sparse and qualified blogpost on NAMA’s latest foray in Dublin’s High Court.

Yesterday NAMA, or specifically, National Asset Loan Management Limited represented by top-tier law firm, McCann Fitzgerald launched two separate actions in Dublin’s High Court – case references 2013/1590S and 2013/1591 S. The defendant in the first case is an individual named “Maria Byrne”. The defendant in the second case is an individual named “Graham Byrne”. As is usual in recently-filed cases, there is no solicitor on record for the respondents.

Who is Maria Byrne and who is Graham Byrne? Impossible to say, because neither NAMA nor the Court Service will confirm their identities, with associated companies or specific or general addresses. Are they related? Other than sharing a surname, “Byrne”, impossible to say, the could be husband and wife, but they could be totally unrelated, naturally or legally. Are they even Irish? Again, impossible to say, they might be Nigerian for all we know.

And why is NAMA is suing them, and what is NAMA seeking from the action? Again, impossible to know as NAMA won’t say and the Court Service won’t provide the application. In the past, NAMA has had lodged very serious applications seeking judgments of hundreds of millions, on the other hand, it has made so-called “protective applications” to reserve its position to sue on a matter for example, when the Statute of Limitations would bar future legal action unless a protective application was made.

So, there you go. NAMA’s 18th and 19th applications in Dublin’s High Court this year. NAMA has been on the receiving end of 15 applications, including 12 relating to a development in Portugal where buyers want their deposits back, one where Paddy McKillen is suing (again) for alleged breach of privacy and confidentiality. And finally please no speculation on who the Byrnes are, you can assume that the names have been Googled and run through company director records and media reporting.

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This afternoon in Dublin’s High Court, Mr Justice Iarflaith O’Neill ruled in favour of the colourful Johnny Ronan’s landlord company in a case against the tenant, the Irish Medical Council. Johnny’s company, Tanat Limited, co-owned with Kildare developer Peter Conlan had claimed that a lease on a property,  Kingram House  off Fitzwilliam Square pre-dated February 2010 when Upward Only Rent Review clauses were outlawed. Although the lease was technically entered into after February 2010, the judge today ruled that a series of exchanges in 2008 were sufficient to establish the existence of a lease then.

So great news for Johnny who will see the rent maintained at €820,000 even though the evidence shows the current market rent for Kingram House today would be €374,100.

The judgment from today is not yet online.

Elsewhere the Court Service indicates that there has not yet been any appeal by Johnny’s company Ickendel against a High Court ruling which saw Bewleys Oriental Cafe win the right to a current market rent rather than the 2007 rent which had been imposed on it. NAMA might have been called on to fund the appeal, and it might be the Agency decides to let this litigation pass. Last year. Johnny lost control over many of his prized assets when NAMA had receivers appointed to Treasury Holdings companies and subsequent attempts by Johnny to have the receivership overturned were unsuccessful. And more recently the Treasury Opera CMBS is ending up in the hands of investors who bought underlying loan rights.

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If you were asked to name the NAMA board, you’d probably struggle beyond Brendan McDonagh the CEO, Frank Daly the chairman and John Mulcahy the head of asset management. But there’s a former IMF mission chief there also, Steven Seeling, not to mention a former county manager William Soffe, former KPMGer Eilish Finan and the board’s most recent appointment Oliver Elingham who got the call from Minister for Finance Michael Noonan last month.

And then there is Brian McEnery, an accountant who is a partner in accountants and receivers Horwath Barstow Charleton in Limerick. Brian was appointed in December 2009 , a full 13 months before General Election 2011 where Brian was director of elections for Limerick-man Michael Noonan who is now of course the most important minister in this administration. Brian’s is chair of NAMA’s audit committee and his term on the NAMA board is set to expire in December 2013.

Last week, Minister for Health James Reilly announced that Brian has been appointed chairman of the Health Information and Quality Authority, HIQA – the organization that monitors standards of health care.

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Take Paddy McKillen, pictured below right.


In 2010 and 2011, he fought tooth-and-nail in Dublin’s High Court and Supreme Court to stop NAMA acquiring his loans. In the end, the Supreme Court judges decided that NAMA could acquire Paddy’s loans but would have to consult with him beforehand. Despite swearing blind at the High Court that Paddy’s loans were “systemic”, NAMA abandoned the fight and decided not to acquire Paddy’s loans which remained at IBRC and Bank of Ireland.

Lucky for Paddy.

Because right now, Paddy has been given a window to refinance his IBRC loans – estimated to be €300m of personal loans and €550m of corporate loans. To refinance his loans, Paddy must repay them 100% and Paddy has been having a whinge through the press recently that IBRC is not accepting his most generous offers which are almost equal to what Paddy owes. Paddy’s window to refinance at 100% expires soon; originally, the liquidator at IBRC was going to have the loans valued by the end of May 2013 and they would then be offered to the market, unless they had been refinanced at 100%. That valuation of the IBRC loans by USB and PwC due at the end of May, seems to have slipped but regardless, it will be a matter of weeks when the un-refinanced loans are offered to the market.

Why is Paddy lucky? Because, even after his refinancing window closes, he will be able to bid for his own loans, and if his bid is the highest and if the bid is in excess of the independent valuation, then Paddy will be able to acquire his loans at a discount. So IBRC into which we have shoveled €34bn will be selling its loans to the market, and if the borrower is the highest bidder for those loans then the loans will be sold to the buyer at a discount, or in other words, the borrowers will receive debt forgiveness or a debt writedown.

To illustrate, if Paddy has personal loans of €300m today, he can refinance these today at 100%, that is pay IBRC €300m and any outstanding interest and fees. After the refinancing window closes, then IBRC will offer Paddy’s loans to the market and say the highest bid is €200m and this is in excess of the market value of the loans, then they will be sold to that bidder regardless of who that bidder is. If it’s Paddy, then he gets €100m of debt forgiveness, no questions asked.

Contrast that with NAMA which is prevented by the NAMA Act from selling assets back to debtors below their par values. So, if a NAMA debtor owes NAMA €300m and offers NAMA €200m for them, and if NAMA markets the loans and €200m remains the highest bid, then NAMA can NOT sell the loans to the NAMA debtor. Which brings us to Sean Reilly (pictured top above, left) who happens to owe NAMA about €300m according to press reporting. Sean is prevented by the NAMA Act from having an interest in buying these loans. The best Sean can do is show some leg to potential investors and try to get them interested in bidding for the loans, and the best Sean can hope for is to act as a consultant after the loans have been sold to someone else.

Minister for Finance Michael Noonan is clueless about all of this, he doesn’t know how much the NAMA proscription is costing NAMA and by extension the State. He also doesn’t know why there is one rule for IBRC disposals and another entirely for NAMA’s.

What an eejit, and given he is being advised by the Department of Finance on these policies, what a bunch of eejits are employed there.

The Minister was responding to a parliamentary question from the Sinn Fein finance spokesperson Pearse Doherty. The response must count amongst the most nonsensical you’re ever likely to see.

Deputy Pearse Doherty: To ask the Minister for Finance the reason the Irish Bank Resolution Corporation borrowers will be eligible to buy their own loans at less than par value when such loans over €10m are offered to the market imminently, but that borrowers at the National Asset Management Agency are precluded by the NAMA Act from buying their own loans at below par value..

Minister for Finance, Michael Noonan: As previously advised, independent third parties are being engaged to independently value the loan assets of IBRC (in Special Liquidation). There is an obligation on the Special Liquidators to ensure that assets of IBRC are sold at a price that is equal to or in excess of the independent valuations that are being obtained. A process is currently being finalised that ensures that maximum value is extracted from the loan sales. The Special Liquidators are responsible for putting in place a liquidation process which fulfils their obligation under the IBRC Act and where applicable the Companies Acts.  It is a matter for the Special Liquidators to determine what bidders constitute qualifying bidders for the purposes of the sales process.

The protocol which is in place for the disposal of the IBRC assets is guided in a specified manner as the Special Liquidator will only be holding the assets for a limited period of time. Any assets that are not sold to third parties for a value higher than the independent valuations will be sold to NAMA at that price. Assets that are transferred to NAMA will then be subject to the protocol according to the NAMA Act 2009.

It is the objective of NAMA in any loan sale to achieve its commercial mandate of obtaining the best financial return on behalf of the State. In accordance with the NAMA Act procedures have been put in place by the Agency to achieve these objectives.

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“It’s hard to make a man understand something when his livelihood depends on him not understanding it” Upton Sinclair


How do ratings agencies make money? It may come as a surprise to some of you that ratings agencies get paid by companies to rate their debt and prospects. Which inevitably places ratings agencies in conflict between their desire to be retained to provide an assessment on one hand, and on the other the need to provide independent credible assessments to the market. But that’s how the business works, and the world’s biggest ratings agencies show no sign of withering away, despite the opprobrium heaped on them after failing to identify looming crises in American sub-prime mortgage lending and European bank debt.

The three main ratings agencies will be familiar to most of you – Standard and Poor’s, Moody’s and Fitch. A fourth ratings agency, Dominion Bond Rating Service (DBRS) might not be a household name but it seems to get disproportionate reference by the NTMA when pointing to how healthy our prospects are. DBRS recently produced an assessment of NAMA, covered here. Whilst it undoubtedly contained useful and factual information, for example the three year accounts analysis, its opinions on NAMA were eyebrow raising in their positivity.

DBRS said of NAMA that it has assembled a “talented team” with “deep experience” and with “the necessary skills to extract the best possible return from the loans and underlying property assets”. DBRS went on to say “NAMA has developed a robust and efficient infrastructure that allows NAMA the flexibility to develop individual responses to each debtor that bests maximizes the returns “

We find out today that although NAMA picks up some of the costs of the ratings agencies generally who rate NAMA’s bonds, that NAMA itself directly pays only one of the ratings agencies and guess which one? Yes, it’s DBRS! How much does NAMA pay them for their handsome compliments? Alas, that is confidential.

The information was revealed in the parliamentary question and response below:

Deputy Pearse Doherty: To ask the Minister for Finance if he will confirm the sums paid by the National Asset Management Agency to each of the ratings agencies Fitch, Moody’s, Standard and Poor’s and Dominion Bond Rating Service in each of 2010, 2011, 2012 and to date in 2013..

Minister for Finance, Michael Noonan: Rating agency costs relating to NAMA are, in the main, paid by the NTMA as part of its overall sovereign rating programme.  NAMA directly bears the cost arising from the rating of NAMA Bonds by Dominion Bond Rating Service (DBRS).  NAMA advises that the terms of its agreement with DBRS are commercially sensitive and of a confidential nature.

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