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NAMA publishes Annual Report for 2010

28 July 2011 – The National Asset Management Agency (NAMA) has today published its first Annual Report. The report covers the period from its establishment on 21 December 2009 to 31 December 2010 and details the significant progress being made by the Agency in the fulfilment of its remit.

Speaking today the Chief Executive of NAMA, Brendan McDonagh said:

“We’ve made enormous progress on a wide range of fronts over the past 15 months and we’re ahead of schedule in respect of many areas.  Our expectation now is that the pace of activity will step up again in the months ahead as we move through the implementation phase of our work.” 

Operating profit and impairment charge

NAMA made an operating profit, before impairment charges, of €305m for the period to 31 December 2010. The following table summarises the key elements of income and expense: 

     €m
Interest income received (mainly on debtor loans and derivatives) 525 
Interest expense (mainly on NAMA bonds and on hedge transactions) (179)
Net interest income 346
Gains/(losses) on derivatives (17)
Administration expenses (46)
Foreign exchange gains/(losses) 22
Operating profit before impairment 305
Impairment charges (1,485)

After impairment charges of €1,485m, NAMA recorded an overall loss of €1,180m. NAMA made an operating profit of €91m in the first quarter of 2011.

Basis for impairment charge

NAMA is required to report its results in accordance with International Financial Reporting Standards (IFRS).

Under IFRS rules, potential losses must be recognised immediately. By contrast, in cases where NAMA’s projections indicate that it will realise more than the carrying value of the loans (i.e. an expectation of profit), it is precluded by accounting rules from recognising such potential gains unless and until they are realised.

The fact that an impairment provision is taken at end-2010 does not necessarily mean that such losses will ever materialise. More information on the estimation of the impairment provision is provided in the Annual Report.

Acquisition

In 2010, NAMA acquired 11,500 loans of 850 debtors with nominal loan balances of €71.2 billion from the five participating institutions. It paid a consideration of €30.2 billion, a discount of 58%.

It is estimated that 61% of the property assets securing NAMA loans are based in Ireland, 32% in UK and Northern Ireland and 7% in the rest of the world. An estimated 59% of the assets comprise investment property and 41% comprise land or property under development.

12 NAMA debtors have par debt in excess of €1 billion each. This does not include any debt they may have with non-NAMA institutions. The following is a distribution of NAMA debtors with debt in excess of €100m:

 Nominal Debt Number of debtors
In excess of €2,000m 3
Between €1,000m and €2,000m  19
Between €500m and €999m   17
Between €250m and €499m 28
Between €100m and €249m 78
TOTAL 135

Debtor business plans

The business plans of the largest 30 debtors (€31bn nominal, representing 44% of the portfolio that had been acquired by end-2010) were reviewed in 2010.

To date (July 2011), NAMA has made decisions with respect to 90 major debtors representing 50% of the portfolio by nominal loan value.

Credit

Following the establishment of a decision-making framework for dealing with credit applications, close to 1,000 credit decisions were taken in 2010 by NAMA or by PIs acting under authority delegated to them by NAMA. These decisions included the following: 

  • Approval of asset sales of €1.9bn
  • Approval of new funding of €406m for working and development capital
  • The initiation or approval of 23 enforcement actions.

To end-June 2011, NAMA had processed an additional 1,500 credit decisions including approved sales of €2 billion and approval of €500m of working and development capital. This brings cumulative asset sale approvals to date to €3.9 billion and cumulative new funding for working and development to €900m. 73 enforcement actions have been initiated and/or approved to date and 33 recommended enforcements have been declined.

Cash

NAMA ended 2010 with cash balances of €837 million. This included the impact of cash receipts of over €1 billion from debtors as well as €240m in funds advanced to debtors, and drawn down by them, for working capital or development purposes. The favourable cash position enabled a loan of €250m which had been provided by the Minister for Finance as working capital in the early part of the year to be repaid in the last quarter. NAMA also repaid an additional loan of €49m to the Minister for Finance in early 2011.

Administration costs

Administration costs for the Agency for 2010 amounted to €46 million.  This is equivalent to 0.16% of the value of assets held on the balance sheet by NAMA at the year end.

The main elements of the €46m paid in administration costs were salary and overhead costs reimbursed to NTMA by NAMA (€15m), loan service fees paid to banks (€13m) and various professional fees (€15m).

 

UPDATE TO JULY 2011

Loan acquisition

Since the end of 2010, NAMA has acquired an additional tranche of €1.1 billion in loans and this has brought its total acquisition to date to €72.3 billion (at a consideration of €30.5 billion).

The Agency may also acquire up to an additional €2.4 billion following an engagement process currently underway with debtors whose loans have not yet been acquired. This engagement is in line with the right to fair procedure as ruled by the Supreme Court.

Debtor engagement

To date, a total of 151 draft business plans have been received from the 177 major debtors whose debt will be directly managed by NAMA. The table below summarises the current status of these debtors’ business plans:

Total 177
  Number of Debtors
Decisions made by NAMA and communicated to debtor1 90
Debtor business plans currently under review 61
Debtor business plans awaited2 26

The first category above – where decisions have been made by NAMA and communicated to the debtors – includes 36 cases where agreement has been reached with the debtors and 27 cases in which debtor business plans have been reviewed and discussions are underway with the debtors. In the case of another 27 debtors who are subject to enforcement, business plans will be produced by the receivers.

In the case of another 670 debtors whose debt is being managed by participating institutions under delegated authority from NAMA, a fast-track business plan process is in place with the participating institutions and those debtors are currently at various stages of engagement with the institutions about their business plans.  In the case of 46 of these debtors, enforcement proceedings are underway.

Update on Cash as at end-June 2011

Cash of €2.6 billion has been generated to end-June 2011. €1 billion of this has been used to repay debt (€750m in Senior Bonds redeemed to date and a loan of €299 million repaid to the Minister for Finance). An additional €0.4 billion has been advanced in working/development capital to debtors and drawn down by them.

NAMA is in a strong cash position as at end-June. €1.1 billion has been retained in the form of cash balances to ensure that NAMA has sufficient funds available for operational purposes. As is the case with the sovereign, it is unlikely that NAMA will have access to debt capital markets for the foreseeable future.

Staffing

The NTMA, on behalf of NAMA, has to date recruited 150 staff with expertise and experience in finance, property, accounting, credit, lending and law. It is expected that the number of staff will have increased to 200 by the end of the year.  

Asset disposal

As of today, NAMA will publish, through its website (www.nama.ie), information provided to it by receivers and other insolvency professionals in relation to property which has been subject to enforcement in Ireland, Northern Ireland and Great Britain. The information will be updated on a regular basis. Today’s list provides details of 847 properties which are in receivership or administration as at 30 June 2011, 68% in Ireland, 32% in UK and NI.

NAMA has today also released its quarterly report and unaudited accounts for the first quarter of 2011. The documents have been laid before the Houses of the Oireachtas by the Minister for Finance and are available on www.nama.ie.  

1 This represents 77% (by acquisition value) of debtors directly managed by NAMA.
2 Up to 12 additional debtor business plans may be submitted following completion of loan acquisition.