chartered accountants nama forum 23 march 2010 michael mcateer fca

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Chartered AccountantsNAMA Forum

23 March 2010Michael McAteer FCA


Contents

• NAMA – The numbers

• The workings of NAMA

• Business plans


Potential size of development portfolio

Banks in NAMA

Bank Size of Book Value (€bn)

AIB 18% 24.1

BOI 11.8% 15.5

Anglo 39% 28.4

INBS 83% 8.3

EBS 4.7% 0.8

Total 77.1


Banks outside NAMA

Banks not currently in NAMA

Ulster Bank have an exposure of €15 bn

We estimate that the other non NAMA banks would have a combined exposure not less than UB

Therefore the total exposure is greater than €100 bn


Asset Location


Timeline of Loan Transfer to NAMA

April May June July Aug Sept Oct/Nov

Cumulative Loans €16bn €24bn €38bn €50bn €60bn €70bn €77bn

Cost to NAMA €11.2bn €16.8bn €26.6bn €35bn €42bn €49bn €54bn

Cumulative Borrowers 10 35 100 300 750 1,200 1500-2000

Average Borrowings €1.6bn €320m €215m €60m €22m €22m €8.75-23m


Our view of workings of NAMA

• Until time of transfer Financial Institution (FI) continues to manage account with duty of Care

• After transfer it appears that NAMA will engage with FI to manage the account on behalf of NAMA (Section 107)

• Outside the top 100/150 connections FI will continue to provide "relevant services" incl. restructuring and enforcement services

• Effect of above is that Banks work out areas will continue to have day to day responsibility for accounts – albeit a different "Boss“ (NAMA)


Other points to note

• NAMA has FI rights under existing security incl. power to appoint Receiver under debenture

• NAMA has additional rights to appoint a Statutory Receiver (SR) in all cases

• SR has far more powers and could make good limitation of powers that might be in debenture

• An appointment of a SR cannot be displaced by an Examiner


Other points to note

• Guaranteed powers of Statutory Receiver incl.– Power to sell– Power to rent– Power to trade and manage– Power to rescind, repudiate, vary or cancel

contracts– Redeem any prior security– Apply for planning permissions etc


Why do borrowers need to prepare business plans?

• to assess if NAMA can facilitate the borrower with working capital requirements in the short term?

• NAMA estimate they will have circa 75 employees

working in portfolio management lending and credit risk

• NAMA have a panel of advisors circa 40 to review the plans

• NAMA will need plans after the loans are transferred

• NAMA has circa €5bn to invest in developments


What will happen to them once submitted?

• NAMA will make an early determination of credit worthiness based on previous performance and level of impairment

• major credit decisions will be made by the NAMA board and credit committee

• the original participating institutions will continue to administer the loans under NAMA control


What the business plan should include – some general pointers

• plans should be prepared from the bottom up

• 3 years is the focus • originally no more that 50 pages, but

complexity will dictate content • detailing what working capital is required

and why it should be given


What the business plan should include – the executive summary

• summary of current group facilities both NAMA and Non NAMA

• overall summary of NAMA repayment plan • business plan summary to include

– property descriptions– ranking of properties based on completion, hold or sale– management involvement including incentivisation.

• cash requirements with time frames • short, medium & long term disposal schedule • all cash generating options available to the borrower


What the business plan should include – the financial and project information

• property summaries at an individual, entity and group level• integrated 3 year P&L, B/S and cash flow on a consolidated

or aggregate basis • details of any projected breaches in covenants and peak

cash flow requirements• details of funding proposals and cash requirements• detail underlying assumptions • projections prepared under base case Plus downside and

upside scenarios. • taxation issues


Other items that should be included

• the management team including remuneration and any incentives

• details of commitments, pledges and guarantees given to any 3rd parties (incl. non NAMA)

• transfers/sales out of the group• local market analysis • the corporate structure • legal considerations


Advice we are giving clients

• embrace NAMA and be proactive • how realistic are the assumptions? • have a team including a property expert/QS • prepare sensitivity analysis • base case should be prudent • show that you are vital to the fulfilment of the

business plan


Conclusion

• NAMA maybe the only supplier of capital for completion of projects

• engagement is essential by the borrower • preparation on a reasonable basis • each project needs to be reviewed separately • the business plan process is an opportunity for

borrower to put best foot forward

fail to prepare... prepare to fail


Michael McAteer FCAT: +353 (0)1 6805 738E: [email protected]

chartered accountants nama forum 23 march 2010 michael mcateer fca

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