Thursday, 5 July 2012
National Asset Management Agency
The debt repayment goals for the National Asset Management Agency, NAMA, have been set by its board and include several targets set out over three-year periods. These are a repayment of 25% of NAMA senior bonds by the end of 2013, 50% by the end of 2016, 90% by the end of 2019 and full repayment of NAMA senior bonds by the end of 2020. These targets are based on a combination of expected asset sales, interest and other income receipts from NAMA debtors and the utilisation of NAMA's cash reserves. NAMA has repaid €3.25 billion of NAMA senior bonds, €1.25 billion in 2011 and €2 billion to date in 2012. This amounts to almost 11% of the NAMA senior bonds in issue.
It is important to consider the repayment of NAMA debt is not the only determination in deciding on the use of NAMA's cash balances. By the end of the first quarter 2012, NAMA had generated € 7.2 billion in cash receipts from borrowers since its inception. Under the National Asset Management Agency Act 2009, NAMA may invest funds to protect or enhance the value of the collateral securing its loans. Where it considers that it makes commercial sense to do so, NAMA may advance funds to projects, including projects located in Ireland, under the control of its debtors or receivers.
NAMA's board recognises that its success in meeting its objectives is closely linked to the performance of the economy in general. A vibrant domestic economy means increased demand for the property assets which secure NAMA's loans. NAMA has advised that it recognises its role in making whatever contribution it can towards instigating a renewal of sustainable activity in the property market in Ireland. I am advised by NAMA that it plans to invest substantial funding over its lifetime in preserving and enhancing the assets that secure its loans, including significant investment in assets located in Ireland, and that a substantial portion of its cash reserves will be used for this purpose. The chairman of NAMA recently announced plans to invest €2 billion by 2016.
Additional information not given on the floor of the House
Acting on my direction, on 29 March 2012 the NAMA board approved the short-term facility with Irish Bank Resolution Corporation Limited, IBRC, collateralised by an Irish Government bond. The €3.06 billion facility was drawn on the 3 April 2012 and repaid on 20 June 2012.
The board of NAMA has primary responsibility for setting strategy in NAMA and for determining and implementing any proposed changes. It is, therefore, a matter for the board to develop and have implemented an appropriate strategy for the management of the cash reserves and assets of the agency.
I thank the Minister for his reply. I understand NAMA intends to repay €7.5 billion of the bonds by the end of next year. The Minister set out the timeline for the redemption of the remaining bonds, namely, 25% of NAMA senior bonds will be paid by the end of 2013, 50% by the end of 2016, 90% by the end of 2019 and full repayment of NAMA senior bonds by the end of 2020. We should not nail ourselves down, however, to too rigid a schedule in redeeming these bonds but retain some level of flexibility. We do not want to engineer a situation where NAMA is forced to engage in fire sales or selling assets in a distressed market to redeem the bonds. I accept the bonds will have to be redeemed. In the fullness of time the objective of winding NAMA up by 2020 may well be ambitious and may have to be revisited given the scale of its work. We should retain flexibility. NAMA has sold many of its best assets abroad. The vast bulk of its sales have been foreign assets such as the gold-plated hotels in London and so forth. It will find it much more difficult when it gets down to the nitty gritty in Ireland. Will the Minister consider retaining flexibility on the redemption of the bonds?
There is not really a timeline set down by NAMA's creditors or the European authorities. There are figures in the programme but there is flexibility in those. So far, NAMA has sufficient moneys to fulfil its objectives. The Deputy will recall when we needed to make a payment on a promissory note, it was cash in hand from NAMA that did it until Bank of Ireland could organise a shareholders' meeting to do it. That money, some €2 billion, was paid back in mid-June.
NAMA keeps cash in hand. Between now and 2016, it will use €2 billion to improve the quality of the properties it holds. Some properties, such as blocks of apartments, are unfinished. NAMA enhances the value of the property and then moves it on. Of course, it can use the money in question on a roll-over basis.
There will also be a second fund of €2 billion, as announced by Mr. Frank Daly, which will focus on vendor financing. As a result, there will be two funds and each will contain €2 billion. The first will pay for the refurbishment and improvement of NAMA's asset base and the second will finance joint ventures with developers to either enhance existing properties or develop them from scratch. IDA Ireland has been in discussions with NAMA because there is a shortage of high quality offices in Dublin that would be suitable for the new tech industries. IDA Ireland has asked NAMA to help to fill the void in this regard.
My primary motivation in raising this issue is to make the point that I do not want a situation to develop where NAMA will be obliged to sell assets in distressed circumstances in a market which may well be on the brink of recovery but in which it will not obtain the best possible return for the taxpayer. In the most recent memorandum of understanding with the troika, provision is made for the redemption of €7.5 billion by the end of next year. I not sure it is a good idea to be elevating commitments relating to the redemption of NAMA bonds into memorandums of understanding. We should retain an element of flexibility in order to give NAMA the opportunity to work out the assets in its possession over time. NAMA should dispose of these assets in the best possible circumstances in order to obtain the best return for the taxpayer.
In general terms I agree with the approach suggested by the Deputy. However, the authorities which provided us with the money do not have a repayment schedule. That schedule is contained in the programme. Those to whom I refer are flexible and sensible individuals and do not want fire sales to occur.
There is another difficulty; it is important remember that we must strike a balance. So much property in Dublin, in particular, but also elsewhere throughout the country is in the hands of NAMA that unless it puts some of it on the market, there will be no market. NAMA is obliged to both create a market and then avail of it. The actions we took by means of the Finance Act have proved to be very effective.