Thursday, 22 March 2012

Questions (64, 65, 66, 67, 68, 69, 70, 71, 72)

Pearse Doherty

Question:

67 Deputy Pearse Doherty asked the Minister for Finance if he will confirm that the provisions of the National Asset Management Agency Act, set out under section 225, which stipulate that any loss made by NAMA over its operating lifetime will be recouped from the so-called participating institutions, are still in effect; and if he will confirm that any eventual NAMA loss will be recouped from those institutions including AIB and Bank of Ireland. [16004/12]

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Written answers (Question to Minister for Finance)

I can confirm that section 225 of the NAMA Act 2009 remains in effect. However, this provision would only come into operation in the event of underlying losses made by NAMA. The section does not operate until the conclusion of NAMA's operations and the overall position of the taxpayer will be taken into account when considering the application of any surcharge. Any decision will be made only after NAMA have prepared a report setting out the aggregate profits and losses of NAMA over the period of its operation. Surcharges would apply to all participating institutions in proportion to the book value of assets acquired from them as a proportion of the total book value of acquired bank assets.

Pearse Doherty

Question:

68 Deputy Pearse Doherty asked the Minister for Finance if he will confirm that the only commitment with respect to the National Asset Management Agency, NAMA, plans given to the troika in May 2011 is via a letter of intent signed by him and governor of the Central Bank of Ireland, Patrick Honohan, which states we will ensure that the costs of NAMA operations are reduced and that NAMA constructively contributes to the restoration of the Irish property market in the course of meeting the asset disposal targets established and monitored by the NAMA board, including disposal of 25% of assets by end 2013; and if he will confirm that no commitment has been given to the troika to repay NAMA’s debt. [16005/12]

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I can confirm that the troika commitments regarding NAMA are included in the May 2011 Programme documents which concern NAMA's governance, operational costs and asset disposal targets. These commitments are included in the May 2011 Memorandum of Economic and Financial Policies and not in the Letter of Intent. As regards NAMA's debt, I would say that NAMA has purchased loans at a significant discount from the participating institutions. Its primary aim now is to repay those loans through the sale of loans or assets underpinning these loans.

Pearse Doherty

Question:

69 Deputy Pearse Doherty asked the Minister for Finance if he will confirm the ex-post approval that has been given by the European Commission to the acquisition of loans by National Asset Management Agency; and the reason there has not been any approval given by the EC to the acquisition of €47bn of NAMA loans. [16006/12]

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I am advised by NAMA that loans acquired by NAMA to the value of €13bn have been approved by the EU Commission to date. This represents the first two tranches and roughly €27bn of par debt. The remaining loans which constitute the third and final tranche of loans acquired by NAMA are currently being processed and the details are being provided to the Commission on the completion of due diligence in line with the agreed procedures. This process is expected to be completed by end-March. EU approval and related publications will be subject to EU commission timelines. When the EU Commission issue their approval this is normally posted on their website.

Pearse Doherty

Question:

70 Deputy Pearse Doherty asked the Minister for Finance if he will confirm if developers whose loans have been transferred to the National Asset Management Agency and whose loans are in default may participate in the purchase of NAMA property through the NAMA qualified investment funds. [16007/12]

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I am advised by NAMA that it proposes to sell property at arm's length to Qualifying Investor Funds which will not be under its control and that it is not normal practice for the seller in such instances to have access to the list of shareholders in the funds. Section 172(3) of the NAMA Act operates to prohibit developers, or companies they control, whose loans have been transferred to NAMA and whose loans are in default, from participating in the purchase of the property secured under those loans from NAMA or a NAMA group entity. It does not operate to prohibit third parties from acquiring such assets. If a developer whose loans have transferred to NAMA is a shareholder in a QIF and controls it or owns it outright, that QIF would be prevented under the Act from purchasing assets from NAMA.

Pearse Doherty

Question:

71 Deputy Pearse Doherty asked the Minister for Finance if he will confirm the cumulative total of the National Asset Management Agency disposal of assets as at the end of quarter three of 2011; if he will confirm the value of sales booked in the accounts on such disposals in NAMA’s quarterly accounts at that date; and if he will confirm the profit or loss booked in the accounts on such disposals at that date. [16008/12]

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I am advised by NAMA that the cumulative total proceeds from the sales of assets to Q3 2011 is €2.7 billion. The proceeds from the sale of assets includes the sale of property collateral related to loans acquired by NAMA and the sale of acquired loans to third parties. I am advised that where property collateral is disposed of, the proceeds are generally applied to reduce the outstanding loan balances and no profit is booked in the accounts in respect of the disposal of such collateral, except in cases where cash in excess of the total amount paid by NAMA for a borrower's overall loans has been recovered. Up to Q3 2011 NAMA had also sold a number of loans to third parties and where a loan is sold to a third party, a gain/loss on the disposal of the loan is also booked. I am informed that a gain of €132m has been booked in its accounts that reflects profits on the disposal of loans and excess cash recovered on the disposal of property collateral up to end Q3 of 2011.

Pearse Doherty

Question:

72 Deputy Pearse Doherty asked the Minister for Finance if he will provide details of the support given by the National Asset Management Agency to the University of Ulster for its so-called land development model; the aim of such support; and the projected cost. [16009/12]

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As a key stakeholder in both jurisdictions NAMA has been involved in pieces of research by the Department of Environment, Community and Local Government and the University of Ulster in mapping land supply and demand. I am advised by NAMA that it is interested in these projects in particular as the outputs of these projects can deliver inherent benefits in terms of guiding strategic decision making around NAMA's portfolio and will aid in maximising value for the taxpayer.

I am advised by NAMA that the University of Ulster is undertaking the Northern Ireland Residential Development Landbank Study. The research rationale is to develop a robust and credible evidence base to: Inform and Support Lending & Strategic Decisions relating to land assets; Identify ‘ workout solutions’ and assess ‘financial viability’; Support/mobilise economic activity; Guide Planning/Regional Policy Decision Making; Create a Sustainable Land Development Model.

The deliverable will be a Spatial Analytical Data Model which overlays landbank assets with planning, infrastructure, demographics and housing need data to produce a holistic picture of land supply and demand in Northern Ireland. NAMA has, individually and collectively with Participating Institutions in Northern Ireland, facilitated the collaboration of all lenders in this critical piece of research. To underpin this NAMA has agreed to be a contributor, both in monetary terms (STG 20,000) and in terms of the provision of data. The Deputy should note that all data is subject to strict confidentiality protocols.

NAMA is also collaborating with the Department of Environment, Community and Local Government on similar work in the State and has worked closely with that Department in establishing a GIS planning tool. NAMA has also commissioned its own internal project to provide geo-mapping of all NAMA related assets in Ireland and this will help in understanding the linkage between NAMA assets and the wider planning and development context.

Pearse Doherty

Question:

73 Deputy Pearse Doherty asked the Minister for Finance if he will confirm if the National Asset Management Agency has made any provision in its accounts for the costs of the legal case with a person (details supplied) which concluded at the Supreme Court in 2011; and if so, if he will confirm the quantum of any such provision. [16010/12]

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I am advised by NAMA that no application for costs of the legal case mentioned has yet been received by the Office of the Chief State Solicitor and that NAMA have not made a provision for such legal costs.

Pearse Doherty

Question:

74 Deputy Pearse Doherty asked the Minister for Finance if he will confirm the amount of working capital and other advances that have been made by the National Asset Management Agency for developments in the Twenty-six counties, both approved and actually paid over. [16011/12]

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I am advised by NAMA that by the end of February 2012, the agency had approved an amount of working and development capital of €1,126 million. 45% of this amount or €506 million related to this State. As at the end of February 2012, of those monies approved by NAMA, it had actually paid over €757 million of which 45% or €341 million related to this State.

Pearse Doherty

Question:

75 Deputy Pearse Doherty asked the Minister for Finance if he will confirm that in addition to developer salaries, the National Asset Management Agency also agrees overhead levels at developers’ companies and if NAMA can quantify the total annual overheads agreed; if NAMA can relate those total overheads to the value of assets managed by these developers’ companies; and if NAMA can compare these overheads with the costs that would be incurred with the appointment of a receiver. [16012/12]

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I am advised by NAMA that the decision as to whether to work with a debtor or to appoint a receiver is primarily determined by NAMA's assessment, in line with its commercial mandate, of how it can best optimise debt recovery for any particular debtor. If it decides that debt recovery is best achieved by working with the debtor, it is NAMA's practice to allow debtor companies to retain certain overhead costs from rental or other income produced by their assets where this is necessary for the company's operations. In a minority of cases, where assets are under development and not yet producing income, funds are advanced to debtors to cover essential overheads pending the completion of the projects involved. Overhead costs typically fall into two categories: Costs associated with the repair and maintenance of properties, insurance premia, local authority rates and professional fees. These are essential costs which would be incurred regardless of whether the assets were being managed by debtors or receivers. Overhead costs also include an allowance for the debtor's remuneration package and the salaries of staff employed by the debtor to manage the assets. The alternative in these cases is to appoint receivers and I am informed by NAMA that receiver costs tend to be substantially higher than debtor and associated staff salary costs.

These overhead payments are a necessary and cost-effective means of preserving and enhancing asset values. In the cases involved, NAMA concluded that working with debtors was a less costly option than enforcement and the employment of external asset managers.

The level of overhead is only agreed following a thorough and rigorous evaluation of the debtor's business plan by NAMA. Each cost element is reduced to the minimum. The level of overhead sanctioned by NAMA typically represents a very significant reduction on the level which prevailed prior to NAMA acquisition of the loans: typically, reductions of 50% to 75% in overhead costs have been imposed by NAMA.

NAMA has collated data on approved overhead costs where agreement had been reached by 31 December 2010 relating to 41 debtors who managed a total PAR debt of €18.6 billion or 25% of the total NAMA portfolio. Approved overheads for the 41 debtors was €55 million. This represents less than 0.3% of the PAR debt involved. Of the €55m in overhead costs, I am informed by NAMA that the bulk of the costs related to essential costs associated with maintaining and preserving the assets.

NAMA is currently collating data on all debtor overhead costs that it has approved and intends to publish this analysis at a later stage.