For most debtors, the business plan review process will culminate in an agreement with NAMA which revolves around a commitment to meet an agreed debt repayment schedule. It will also cover areas such as the reversal of asset transfers, company overheads, non-property assets and rental income.
Once a debtor’s business plan is accepted, he is given a short deadline to indicate his agreement to NAMA’s terms. Agreement is then recorded through a signed Memorandum of Understanding (MOU), the terms of which are detailed in a term sheet and given contractual status. Not all Business Plans will reach formal MOU stage immediately as NAMA may opt to work with a debtor on a trial basis for a period in order to ascertain whether the debtor is being co-operative, making full disclosure and is being realistic in terms of the lifestyle implications of NAMA support.
The Debtor Business Plans will include implementation milestones and adherence to these is monitored and reviewed regularly by NAMA. Where a debtor does not comply with his contractual obligations, enforcement action may have to be taken. This means that the Agency will likely appoint a receiver to manage the assets securing the loan.
Meeting agreed debt reduction targets will usually require a programme of significant asset sales by debtors. The timing of these sales will depend on the type of property involved (residential investment, commercial investment, land, etc), the jurisdiction and location of the property and the scheduled expiry of any associated leases.
As debtors reduce their debt to NAMA, the Agency will in turn pay down the securities issued as consideration for the acquired loan portfolio. The Board of NAMA has set a number of debt reduction targets over its expected life, including a target of 25% by 2013, 80% by 2017 and 100% by 2019.