Transcript Document

Presentation to Permanent Committee on the Cadastre
19 June 2013
Response to Irish Banking Crisis
Key Milestones | 2008 - 2010
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April 2009 | Plan to establish NAMA
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July 2009 | Draft Legislation published
the guarantee scheme
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September 2009 | Legislation introduced
December 2008 onwards |Recapitalisation of
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November 2009 | NAMA Act passed into law
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December 2009 | Board and CEO appointed
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February 2010 | EU Commission approves NAMA
September 2008| Irish Government guarantee
for banks liabilities of €440bn
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October/November 2008 | External examination
of loan books of all institutions which partook in
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certain financial institutions
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January 2009|Nationalisation of Anglo Irish Bank
February/March 2009|Review of options on how
to deal with impaired assets
scheme under State Aid regime
NAMA Timeline
2010 & 2011
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February 2010 | NAMA established as part of the Irish Government’s response to the banking and
property crisis and received formal approval from EU Commission
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NAMA was given the objective of ‘cleansing and repairing the banks’ balance sheets’
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March 2010 | Transfer to NAMA of the initial largest borrower exposures across the five Participating
Institutions (PIs) commenced
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September 2010 | Minister for Finance decided to exclude sub €20m loans in AIB and BOI and to
expedite transfers
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October 2011 | €74bn of assets had transferred at a cost of €31.8bn (57% discount)
NAMA Establishment
Valuation and Loan Transfer Process
NAMA’s Liquidity Injection into Banks
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NAMA acquired loans with a nominal value of €74 billion for consideration of €31.8 billion - 57%
discount
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Consideration paid to five Participating Institutions (PIs) included Senior Bonds of €30.2 billion and
€1.6 billion of NAMA subordinated debt
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Senior bonds were available to exchange for funds from the ECB - represented a substantial
injection of liquidity into the Irish banking system and removed systemic risk to Irish banking
system posed by land and development loans
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Following loan acquisition NAMA was responsible for managing 775 debtor connections including
more than 5,000 borrowing entities and in excess of 12,000 loans in a range of currencies
(subsequently disaggregated into 58,000 individual property units)
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Ultimate purpose of NAMA is to deal expeditiously with acquired assets and to protect or
otherwise enhance their value
What is NAMA?
50%
Act Like a Bank
50%
Intensive Asset
Management
NAMA Recruitment
Built Organisation Alongside Loan Acquisition & Debtor Engagement
2,000+ CVs received within 6 months of announcement
300
NAMA staff at end-May 2013
250
217
202
200
145
150
104
100
54
50
7
0
224
255
Portfolio Management
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All debtors have undergone a business plan process designed to assess their commercial viability and
their willingness to co-operate with NAMA
The 189 largest debtor connections (generally those with par debt in excess of €75m) managed
directly by NAMA accounting for €61 billion in par debt
Day-to-day relationship management of the other 586 debtor connections (€13 billion in par debt)
delegated to the PIs
NAMA is working consensually with the majority of debtors to achieve the best result for the taxpayer
through the workout of loans and underlying properties
Where a consensual approach is not possible, enforcement proceedings are initiated – at end-2012,
271 separate insolvency appointments (relating to 207 debtor connections) had been made
Portfolio Management
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NAMA paid €31.8bn to acquire 12,000 loans to 775 debtor groups.
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These loans were secured by more than 10,000 properties containing over 58,000 units
189 Debtors
586 Debtors
€61bn Par debt
€13bn Par debt
Intensively managed by
NAMA
Relationship management performed by
the Participating Institutions NAMA Units
through NAMA Delegated Authority
Key credit decisions and
relationship management
carried out by NAMA multidisciplinary teams
NAMA has a presence in each of the bank
units overseeing the management of the
portfolio
Loan administration
performed by Participating
Institutions
Relationship management and loan
administration carried out by
Participating Institutions within NAMA
policy & procedures
Breakdown of Property Portfolio
Portfolio is better than NAMA could have imagined at outset
Property Portfolio by worldwide location
Breakdown of Property Portfolio
NAMA’s portfolio is where investors want to be - facilitates orderly
disposal of assets
Regional breakdown of Irish property
Regional Breakdown of British Property
Business Plan Process
Work Completed
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• Each borrower was asked to prepare a realistic and concise Business Plan
• NAMA assessed each Business Plan to evaluate whether it is realistic
• NAMA met major borrowers to discuss proposed plans
• If no agreement reached, or the debtor does not wish to cooperate with NAMA, they
were asked to repay debts in full and, failing this, enforcement action was considered.
NAMA has declined to appoint in a significant number of other cases
• Focus now is on actively implementing the approved strategy for each debtor
By end-June 2012, all 789 debtor business plans had been assessed. Based on these assessments, strategies were
adopted by NAMA towards each of the 775 debtor connections. Typically, debtor strategies tended to fall into
three broad categories: (1) support, (2) disposal or (3) enforcement.
NAMA’s Approach to Debtor Management
Borrower sells real estate
assets in accordance with
Business Plan
Consensual Connection
Sell entire connection’s loans
as a portfolio
No
Enforcement
Sell standalone, non recourse
loans
Non Consensual
Connection
Enforce
Fixed Charge
Receiver /
Administrator
Holds
NAMA Owns
Sell single assets
Complete value add
strategies then sell
Create portfolios of
assets (sector /
location) for sale
/refinance
Debtor Debt Restructuring
NAMA pursues one of five restructure options with debtors:
i. Full restructuring (new security and loan documentation)
ii. Limited Restructuring (existing security and legal documentation)
iii. Letter of support (most common)
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Requires that a debtor implement a number of milestones in relation to debt reduction. The letter of
support must be accepted by the debtor. Support may, in certain limited situations, take the form of a
full or partial restructure of loans or may be provided without any changes to the underlying facilities
iv. Disposal
v.
Enforcement
Full restructuring is typically progressed with compliant debtors and increases the potential monetising
options for future recovery/disposal. A full restructure involves the creation of a new loan agreement and
associated security documentation.
Debtor strategies (as at end-2012)
Strategy
Support
Disposal
Enforcement
Total
% of NAMA debt
58%
18%
24%
100%
NAMA’s Performance Three Years On
NAMA is profitable for the second year running
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We have made a profit in 2012, after tax and impairment, of over €200 million
And is generating strong cash flows
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€12.4 billion in cash inflows
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Generated since the Agency’s establishment, from a standing start, just over three years ago
€8.2 billion completed asset sales
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80% of sales in UK, mainly London, where we are fortunate to hold security over a substantial
number of very good assets. Selling assets in UK at sub 5% yields, and in some cases closer to 3%
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Seeing emerging demand for Irish assets and that will increase in the coming years. We are
investing to take advantage of that
€4.2 billion in recurring cash, mainly rental receipts
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€100 million in monthly non-disposal cash flows. This is despite the sale of nearly €8 billion of
assets and contrary to the suggestion that we have sold the ‘low hanging fruit’
NAMA’s Performance Three Years On
… enabling us to fund our investments, wash our face and pay down debt
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Investing to enhance value: €1.8 billion in new approved advances to end-May across our
portfolio, €1.2 billion of which has been drawn down.
Paying our own way: NAMA covers all of its own administration costs. Not a cent of the
tax people pay is needed to prop up NAMA and we intend to keep it that way. And we are
keeping those running costs very low as a result of close and stringent cost management
Repaying our debt: We have redeemed €6.25 billion of senior bonds (21% of the Agency’s
total senior debt liabilities) and are firmly on course to meet our end-2013 target, which is
also part of the Troika programme, of repaying a quarter of our bonds
Key objective: To repay all our senior debt by 2020
NAMA Cash Receipts
Disposal Income/Non Disposal Income
Cash Generation versus Bond Redemption
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Total cash inflows of €12.4bn to 10 June
generated since inception
 2010: €1.0bn
 2011: €5.1bn
 2012: €4.5bn
 2013: €1.8bn
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Interest Income – Approx. €100m
monthly run-rate of cash generation
from recurring income (mostly rental
income)
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Bond redemption target of €7.5bn by
end 2013
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To date Bond Redemptions of €6.25bn +
€299m repayment of Central Fund
loans
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Remaining redemptions
 2013: €1.25bn
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Current Cash & Liquid Assets position of
€3.2bn as at 10 June 2013 (includes
receivable of €1.12bn from NTMA in
relation to derivative collateral
agreement)
Debt Repayment
NAMA Senior Bonds
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June 2013 | €1.5 billion of NAMA Senior Bonds redeemed representing cumulative of €6.25 billion (21% of
senior debt liabilities
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On course to meet target of redeeming €7.5 billion of Senior Bonds by end-2013
All NAMA Senior Bonds of €30.2 billion expected to be redeemed by 2020
€ billion
June 2013
payment
€1.5 billion
Expected
payment in
Q3/Q4 2013
€1.25 billion
How the €12.4 Billion Cash was Generated
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A significant amount of work is done behind the scenes to deliver these results involving
day-to-day intensive management
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775 Business Plan reviews completed by end 2012 which are reviewed quarterly by NAMA
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Over 4,000 asset sales transactions
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€100 million per month recurring income on portfolio despite over €8bn of asset sales
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Over 25,000 credit decisions made since inception - €1.2 billion in new money
drawdowns
Response times improved despite increasing volumes – average turnaround times now
less than 5 days
€100 Million in Monthly Recurring Cash
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NAMA is generating, on average, €100 million in monthly recurring cash, mainly rental
receipts
Key part of NAMA’s approach has been, through intensive day-to-day management of
debtor connections, to ensure that buildings are rented and that rental income is
mandated to NAMA.
After acquisition of loans, it became quickly clear to NAMA that there was significant and
widespread leakage of funds – most notably rental income – which should have been
applied by debtors towards debt repayment. NAMA has addressed this leakage –
NAMA’s approach involves oversight of the collection and lodgement of rental income
and, as required, the appointment of agents with a duty of care to NAMA to collect
rents
NAMA, through its work with debtors and receivers, has secured tenants for previously
empty buildings, capturing recurring cash and increasing long-term recoverable value
Actively Selling
– But Responsibly
• At end-2012 asset sales completed were €6.8
billion (3,900 individual properties), including
€2.8 billion completed in 2012.
Disposals by location, inception to end-2012
Rest of World |
8%
Nth Ireland | 1%
• Asset sales completed to date 2013 of €8.2
billion.
Ireland | 12%
• 80% of sales in UK, mainly London, where
NAMA holds security over a substantial number
of very good assets. Selling assets in UK at sub
5% yields, and in some cases closer to 3%
• In Ireland, over €1.5 billion of assets on the
market for sale through debtors and receivers.
• Seeing emerging demand for Irish assets and
that will increase in the coming years. NAMA is
investing to take advantage of that
Rest of GB | 16%
London | 63%
Market Outlook
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Cautious optimism for the medium term
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Recovery of Irish property market is underway but will not be homogeneous
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Recovery will be in main urban centres first and investment grade properties
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Good for NAMA given the urban centric location (94%) and quality of the Irish portfolio
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Renewed interest in NAMA’s Irish property portfolio – perception the country is
improving. Emerging demand in some key areas, interest in NAMA Vendor Finance and
take up of NAMA Deferred Mortgage offerings
Development Capital Commitment for Ireland
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Quality of our portfolio is informing our strategy, both in terms of disposing of assets
where the opportunity presents itself and investing in assets, particularly in Ireland, to
enhance their value over a medium-term horizon
In Ireland, we have committed to providing at least €2 billion in development capital over
the period to end-2016 to preserve and enhance the value of our assets – creating the
low hanging fruit of tomorrow
That’s not just an idle promise - €800 million has already been approved and €500 million
has already been drawn down and is being spent as we speak on projects in places
ranging from Dublin to Cork, Drogheda, Galway, Kildare
The commitment includes the completion of properties which are currently under
development and new development in anticipation of future supply shortages and
demand
NAMA Development Funding
Dublin Docklands
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As an example of our approach, we are
devoting particular attention to the
Dublin Docklands, where we have
significant holdings that we believe will
be attractive for expansion of the IFSC
and the development of future
technology and business hubs
Our plans are closely aligned with what
the IDA and others are telling us about
demand for quality office space and the
fact that the Docklands is where Ireland
will compete internationally for
corporate occupiers through the IDA
We are currently assessing the
commercial feasibility of a wide range
of projects
The timing of actual drawdowns of
funding in the Docklands, as elsewhere,
is dependent on resolution of planning
and particularly infrastructural issues
that are key to enhancing the
commercial viability of these projects.
An aerial view of the Dublin Docklands area where NAMA holds security over a significant
number of buildings and sites.
NAMA Strategic Initiatives
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Vendor Finance - Offers medium-term finance to purchasers of commercial assets or loans with €2bn
in vendor finance available to prospective purchasers - €360m agreed in 5 transactions to date
Rent Abatements –222 applications for rent abatement granted (96%) with an aggregate value of
€14m per annum
• Deferred Payment Initiative (DPI) – Offers price protection to
residential buyers. The DPI has now been operational for 12
months and is offered on 400 properties in 28 developments
across 13 counties nationally. To date, sales have been achieved
on 167 properties, resulting in a total sales value of €32.2m
• Social Housing - Offers purchase and long-term leasing options to
local authorities and approved housing bodies. More than 4,200
units identified (local authorities determine suitability). Pace of
delivery not controlled by NAMA. Since the commencement of the
social housing initiative in 2012, 367 properties have been
completed and committed to social housing by NAMA debtors and
receivers – It is up to AHBs to agree and sign leases
A house in Castlerock, Co Limerick, which is one
of the properties available through NAMA’s DPI
NAMA and IBRC
Existing IBRC/NAMA portfolio
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IBRC (in Special Liquidation) manages par debt of €41 billion for NAMA acquired under
2009 NAMA Act. IBRC provided Primary servicing (loan administration) on €36 billion par
debt but provided Primary and special servicing (business engagement with over 300
debtors) on €5 billion par debt.
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These services are currently in the process of being migrated to Capita (NAMA’s back-up
primary and special servicer). Credit and risk and legal services will be taken over by
NAMA. Other services will migrate to Capita on a phased basis between July 2013 and
early 2014.
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NAMA and Capita are currently recruiting from within the 200 staff in the IBRC NAMA
Unit.
NAMA and IBRC
New IBRC portfolio
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Estimated €24 billion commercial loans portfolio and a €1.8 billion residential loans portfolio
to be valued and offered for sale by the Special Liquidators during the second half of 2013.
NAMA has no role in this process.
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Loans not sold during this process will be purchased by NAMA at a price to be determined by
the Special Liquidators in line with Valuation Instructions published on 17 May 2013.
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Under the Instructions, loan valuations are to be completed by 30 November 2013 and the sale
of IBRC assets must be agreed or completed before 31 December 2013 or as soon as practicable
thereafter.
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NAMA making preparations for loan acquisition - has held a tender to appoint primary and
special servicers to both portfolios and expects to make appointments within the coming
weeks.
NAMA | 2013 and Beyond
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Continue to build significant organisational capability, while running a business that has delivered
outstanding results
Work-out strategy and platform in place for debtor connections
Strategy implementation and delivering key asset management enhancement and completion of
projects
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Property Portfolio is well located which in time should facilitate orderly disposal of assets
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NAMA has independent funding availability
NAMA faces a number of key challenges
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Continuing difficult Irish market with other institutions deleveraging
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Lack of market liquidity
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Recent IBRC liquidation
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Status as a public body means less flexibility than banks
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Staff retention
Summary
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NAMA Senior Debt redemption is on target. Repayments of €6.25bn have been made to date and a
total of €7.5bn will be repaid by the end of 2013
Total cash flows in excess of €12bn have been generated, and NAMA currently has €4.4bn of cash and
liquid assets on hand
Non-disposal cash flows of approximately €100m per month are being generated, in addition to sales
proceeds
NAMA continues to generate Operating Profits after Impairment charges, despite unfavourable
market movements
Focus on maximising income and managing Debtors, Receivers and Assets to enhance value
Presentation to Permanent Committee on the Cadastre
19 June 2013