Written answers
Tuesday, 13 October 2009
Department of Finance
National Asset Management Agency
12:00 pm
Joan Burton (Dublin West, Labour)
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Question 111: To ask the Minister for Finance his views, with respect to Parliamentary Question No. 351 of 6 October 2009 and his comments made during the Second Stage debate of the National Asset Management Agency Bill 2009, on whether rising yields are a function of falling property values and on whether yields will fall if rents are adjusted downwards; his further views on whether in many cases when retailers and other businesses are in financial difficulties it is both expected and desirable that rents, and thus yields on the underlying properties, fall from their current unsustainable levels and if yields were to fall in this manner, the business case for NAMA would be undermined; and if he will make a statement on the matter. [35652/09]
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Yields are a factor of both property prices and rental income. As I have indicated previously, yields are now significantly above their long term averages. The final outcome of the adjustment of rents and yields and its effects will not be known for some time, and is interlinked with the performance of the economy generally. The valuation process will take into account the individual characteristics of loans transferred to NAMA, including the actual and prospective yield on underlying property.
Joan Burton (Dublin West, Labour)
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Question 112: To ask the Minister for Finance if he, his Department officials, the National Treasury Management Agency, the National Asset Management Agency or the professional advisers at his disposal have carried out stress tests with respect to NAMA in terms of interest rate movements; if he will confirm that senior NAMA bonds will be short dated with a maturity of less than one year; his views on whether this poses a significant potential re-financing risk; the coupon rate at which he expects the initial NAMA bonds to be issued; the coupon rate at which NAMA would no longer break even, or have a negative annual cash flow; and if he will make a statement on the matter. [35653/09]
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Various stress tests have been carried out on the interest rate exposure likely to be faced by NAMA and a summary of the results will be provided in the NAMA Business Plan which will be published in the coming days. One of the responsibilities of the NAMA Board will be to assess the extent of its interest rate risk and to provide direction as to how it should be managed. It is the intention that NAMA will issue short-dated securities with the interest rate linked to six month Euribor as consideration for the acquisition of bank assets. The detailed terms and conditions of these securities, and of the subordinated bonds which will also be issued, are currently under consideration.
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