NAMA is Facing Liquidity Crisis

JTMan

This disclosure around NAMA is frightening ...

http://namawinelake.wordpress.com/2010/10/25/is-nama-facing-another-cash-flow-crisis-and-where-is-that-second-quarter-nama-report-that-was-due-nearly-a-month-ago/

It came as a surprise to many that in May 2010, NAMA needed a €250m “working capital advance” repayable in October 2010. A surprise because NAMA already had €100m of capital (€51m from the “independent” private sector and €49m from the State) and also NAMA had taken over €16bn of loans and at least a third were supposed to be performing. Anyway, a €250m advance was provided by the Minister for Finance and was revealed in the Dail a day before it was disclosed in the May 2010 Exchequer statement. Today NAMA has less than a week to repay the €250m. This entry examines the likelihood of that happening, the probability of another bail-out (or “working capital buffer advance” in the language of Upper Merrion Street). The entry again asks about NAMA’s quarterly report and accounts which was due by the end of September 2010 (relating to the second quarter to 30th June 2010) – why is there a delay and is the delay due to the consideration of any excision from the report?

I believe NAMA is facing a liquidity crisis – remember that term from the banking crisis? It’s supposed to refer to a situation where NAMA is due cash (either in interest or capital or from its euro paper programme) but can’t actually lay its hands on the readies, and meanwhile there are developers pleading for working capital and indeed salaries around the €200k per annum mark if you believe some of yesterday’s newspaper reporting. The reasons I believe NAMA is facing a liquidity crisis are as follows:

(1) Although the NAMA Act allows NAMA to raise up to €5bn in lending to assist with working capital needs and in particular to help with finishing out projects, NAMA only initiated the programme to raise some of this money at the start of September 2010. At the time NAMA confirmed that it intended issuing €2.5bn of short-term debt and that the debt would be State-guaranteed. Four weeks later the government announced its withdrawal from the bond markets until 2011 citing ridiculously high interest rates. Where does that leave NAMA with its State-guaranteed paper? There has not been any update to the programme by NAMA since the start of September 2010. Has it been abandoned?

(2) NAMA unexpectedly received €250m as a “working capital buffer advance” in May 2010. This advance was to be recoupable in October 2010. The advance was not signposted at all in the Dail and was only revealed at the start of June 2010 when Deputy Richard Bruton asked a question about NAMA’s funding (as it happened the next day the May 2010 Exchequer statement revealed the existence of the advance).

(3) Although we don’t yet have the second quarter NAMA report and accounts we do know that the proportion of performing loans has reduced from 40% in the draft Business Plan to 33% in April 2010 to 25% in June 2010. Has the situation since improved? What exactly is a performing loan and does it denote loans which might have roll-up interest provisions? If we had the Q2 accounts we might be able to surmise the cash flow from “performing loans”. Alas we don’t. It was supposed to have been delivered by NAMA to the Department of Finance by 30th September, 2010. Remember it relates to the second quarter ending 30th June, 2010 so it’s not as if NAMA had to rush to produce the information – it had 90 days. Has NAMA produced the report and accounts and if so, why is the Department of Finance sitting on it? We have learned to be very cautious when we get broadbrush statements from the DoF in recent times – “turning the corner”, “broadly in line with expectations”, the god of all gods “international confidence”. I wouldn’t be surprised if the DoF were to say they were too busy with dealing with the budget deficit, the consequences of the banking bailout announcements in September or indeed contingency planning for IMF/EU intervention. But still, are they unable to release a report and accounts which after all should have been produced by professionals in NAMA.

(4) The Independent reports that some six of the first ten developer business plans have been approved by NAMA and that each makes a call on NAMA for additional funding. The Independent also reported some weeks ago that NAMA had spent €40m in the second quarter on “working capital advances”. The Top 10 developers reportedly asked for €1.5bn in advance funding.

(5) NAMA needed to pay the first tranche of interest on NAMA bonds in September 2010. Back of the envelope calculations on here suggest the payment will have been close to €30m.

(6) Three weeks ago in the Dail, Minister for Finance Brian Lenihan said that NAMA would spend €215m on professional fees in 2011. He didn’t give numbers for 2010. But it would not be improbable that NAMA has spent €100m+ in quarters two and three.

(7) Although Brendan McDonagh said that NAMA was at an advanced stage with disposing of €500m of property in September, 2010 there has not been any official announcement of any sale. There was confusion in September 2010 about whether NAMA intended the €500m to relate to the sale of loans or of real property (if the latter then the sale would have been by developers under the auspices of NAMA as NAMA has not yet foreclosed on any property, with a potential exception of Paddy Shovlin and the Fitzpatrick brothers’ property securing loans from Bank of Ireland). There has been speculation that NAMA is close to overseeing the sale of property in London and Ireland. On Friday last the FT reported that a sale of a GBP 11m property in the UK might have been agreed by NAMA. And one of the NAMA putative Top 30 Tom McFeely and Larry O’Mahony are said to be the owners of the 30 flats in Mulhuddart (with Martin Ferris acting as receiver) which have been on the market for some time and which HT Meagher O’Reilly said last week had been sold for €1.9m. NAMA hasn’t made any announcements and the sale of the Mulhuddart flats may take some time to complete.

Add these together and it seems probable that NAMA will be unable not only to make the €250m repayment to the Exchequer in October 2010 but may require an additional advance ....

ei.sdraob

the proportion of performing loans has reduced from 40% in the draft Business Plan to 33% in April 2010 to 25% in June 2010.

must be alot of rich wives out there now...

i do remember threads last year with people claiming that most of the assets will be "performing", 25 ****ing % :rolleyes:


anyways the guy behind namawinelake needs to be picked up by the media, while they are busy publishing rubbish like Alison ramblings about her docklands "prison" this type of coverage and analysis goes unnoticed

egan007

credible source...
They'll make a prime time out of that.

Voltex

Not sure where or how we are with the planned disposal of 500 million euro of assets.
http://m.irishtimes.com/newspaper/breaking/2010/0910/breaking26.html?via=rel

Sponge Bob

planned ain't cash, Lenihan will do a nama for nama any time now

whippet

I can't find anything online but I am sure I heard on newstalk this morning that NAMA has managed to sell a London property for something north of €100m and had only paid around €30m for the loan?

Laminations

whippet wrote: »

I can't find anything online but I am sure I heard on newstalk this morning that NAMA has managed to sell a London property for something north of €100m and had only paid around €30m for the loan?

This I fear is going to be the smoke and mirrors magic show that is NAMA. That figure looks great, €70m profit for NAMA and if NAMA finishes with a profit then it'll be hailed as a success. But what if Anglo lent €200m for that property? The pretend profit of NAMA actually disguises a €100m loss to the tax payer who has recapitalized Anglo. This whole thing is a lose-lose for the tax payer

NAMA is not interested in recovering what the loan was originally worth, it just needs to get more than it paid for the bad loan

whippet

Laminations wrote: »

This I fear is going to be the smoke and mirrors magic show that is NAMA. That figure looks great, €70m profit for NAMA and if NAMA finishes with a profit then it'll be hailed as a success. But what if Anglo lent €200m for that property? The pretend profit of NAMA actually disguises a €100m loss to the tax payer who has recapitalized Anglo. This whole thing is a lose-lose for the tax payer

NAMA is not interested in recovering what the loan was originally worth, it just needs to get more than it paid for the bad loan

I don’t accept that it is smoke and mirrors. The media hype was all around the headline figure and it was almost put out there that every penny given out by NAMA was not going to be recovered etc. The headlines were all about the total figured paid.

While there is no doubt that regardless of the final figure there is massive cost to the taxpayer, the fact that NAMA is turning a profit on some loans is good news.

whippet

Laminations wrote: »

This whole thing is a lose-lose for the tax payer

this isn't in dispute, we have all accepted that it is lose lose for the tax payer, we can see that in the austerity measures we have to look forward to.

Really what I am saying is that NAMA as a tool to salvage what it can from the trainwreck of the banks balance sheets could actually work

Liam Byrne

whippet wrote: »

Really what I am saying is that NAMA as a tool to salvage what it can from the trainwreck of the banks balance sheets could actually work

That's a tautology.........saying "salvage what you can" will always be a success, because you can't "salvage what you can't".

Even if NAMA "works", it hasn't worked, because we still have to make up any losses due to the banks.

Scarab80

whippet wrote: »

I can't find anything online but I am sure I heard on newstalk this morning that NAMA has managed to sell a London property for something north of €100m and had only paid around €30m for the loan?

http://www.independent.ie/business/irish/nama-makes-euro140m-profit-on-anglo-loan-deal-2394084.html

It's the sale of a car park in Mayfair owned by Park-Rite (aka Derek Quinlan). Sold for 180m, paid Anglo 40m for it, any profit made by the developer will be retained by NAMA to offset against his other loans. Bad news all round I guess....

whippet

taken from the article

Under NAMA, however, all a developer's debts are bundled together. If a developer makes €200m from selling a building he only owed €170m on, all €200m will flow into NAMA where it will be offset against his total debts from different banks.

That is why using a tool like NAMA was a better option than having a good / bad bank system. Using a mechanism like NAMA it mean that all monies recieved from sales will flow back in to the system

padrepio

Scarab80 wrote: »

http://www.independent.ie/business/irish/nama-makes-euro140m-profit-on-anglo-loan-deal-2394084.html

It's the sale of a car park in Mayfair owned by Park-Rite (aka Derek Quinlan). Sold for 180m, paid Anglo 40m for it, any profit made by the developer will be retained by NAMA to offset against his other loans. Bad news all round I guess....

how much would a liquidator for anglo have got for it - that is the question you would have to ask to see if Nama actually is doing a better job?

nama may have recouped a 140m profit but it is pretty likely the initial loan from the now state owned anglo was probably for close on 180m anyway.

I wonder what NAMA can expect to receive if they sell battersea power station. property prices in London seem to have picked up

Scarab80

padrepio wrote: »

how much would a liquidator for anglo have got for it - that is the question you would have to ask to see if Nama actually is doing a better job?

Obviously impossible to say, but given a liquidators job is to make a quick sale and potential buyers know that the property has to be sold prices are generally not that high. Also it should be remembered that NAMA do not own this property, Derek Quinlan does, so it was most likely Derek Quinlan who made the sale, not NAMA.

padrepio wrote: »

nama may have recouped a 140m profit but it is pretty likely the initial loan from the now state owned anglo was probably for close on 180m anyway.

I'd say it's pretty unlikely, Anglo provided for a 12.5% provision on UK loans transferring to NAMA as part of their overall provision of 28.5% on all loans transferring. Final discount on all loans was 56% on tranche 1 when this loan was transferred so about double what NAMA had provided therefore it is not unreasonable to assume that a 25% discount would have been taken on this UK loan, giving a nominal value loan of 53m. I would guess that the difference in loan value and sale price is due to the loan being an older loan which had been paid down and was still in positive equity or due to development planning permission which was granted in Feb 2010 raising the value of the property post NAMA valuation date of Nov 2009.

padrepio wrote: »

I wonder what NAMA can expect to receive if they sell battersea power station. property prices in London seem to have picked up

Again NAMA do not own battersea power station, REO do. What happens if planning permission is granted is anyones guess, NAMA don't have the finance to bankroll development of the site so it will probably have to be sold on if REO can not get other sources of financing.