Brendan Smith (Cavan-Monaghan, Fianna Fail)
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To ask the Minister for Finance his views on the best use of the cash reserves on hand with the National Asset Management Agency; and if he will make a statement on the matter. [14052/13]

Michael Noonan (Limerick City, Fine Gael)
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The Deputy will note that 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 determine an appropriate strategy for the management of the cash reserves and assets of the Agency. NAMA’s cash reserves are deployed towards repaying its debt, funding capital advances to develop and complete projects, meeting its ongoing liquidity requirements, including its operating costs.

The Deputy is aware that NAMA’s ultimate objective is to repay over its lifetime, at a minimum, all of the Senior Bonds issued to fund the acquisition of loans. In this respect, NAMA’s strong cash performance since inception has enabled the Agency to repay €4.75 billion in senior bonds to date and I am advised that the Agency is firmly on course to meet the target of reducing its debt by a cumulative €7.5 billion by the end of 2013. NAMA’s ability to meet this target is important in terms of the perception of Ireland held by international investors and by the rating agencies in the context of the country’s return to the sovereign debt markets. The target is also monitored closely by the Troika and influences their view of Ireland’s progress. NAMA expects that its end-2013 debt repayment target and the full repayment of its Senior Bonds over its lifetime will be met from income generated by debtor assets and from the proceeds of asset disposals by its debtors and receivers.

In line with the overriding objective to repay its Senior Bonds, NAMA has also outlined plans to advance substantial funding over its lifetime to preserve and enhance the value of assets securing its loans, including significant funding for assets located in Ireland. As the Deputy may be aware, NAMA has announced that it will advance funding of up €2 billion in Ireland over the next four years for the completion of projects currently in progress and the development of new projects to meet prospective supply shortages in certain sectors. This funding will be advanced entirely from NAMA’s cash reserves. NAMA advises that it has already approved €700 million in new advances for the completion of commercial, retail and residential projects across Ireland and over €1.7 billion across the entire NAMA portfolio. NAMA’s objective in advancing this funding is to increase the long-term recoverable value of the assets securing its loans. In addition, NAMA has announced plans to lend at least €2 billion over the next four years in vendor finance to purchasers of commercial property securing its loans. NAMA advises that this is one of a number of measures being implemented to help monetise its portfolio in Ireland and is part of its commitment to contribute in a tangible way to sustainable recovery in the Irish property market. Through these plans, NAMA will inject €4 billion into the Irish economy over the next four years, representing a significant contribution to employment and economic recovery at a time when investment is otherwise curtailed.

In addition to repaying NAMA’s debts and advancing development capital to enhance its assets, NAMA will use its cash reserves to meet the agency’s on-going funding requirements and operational expenses. In this context I am advised the NAMA Board considers it will not require additional resources from the Exchequer over its lifetime. The Deputy will note that NAMA’s operating costs in 2012 as a percentage of cash generated were of the order of 3%, which is substantially lower than that of comparable entities.

The Deputy will also be aware that, in managing its liquidity needs, NAMA must ensure that it has available liquidity over the medium term to meet all of its contractual obligations as they fall due. Such obligations include coupon payments due on its bonds and derivative contract payments. It also, as outlined, includes its day-to-day operating costs and the advances to debtors for working capital and project funding which are often required at short notice. I am advised that updated liquidity projections, based on these various expected inflows and outflows, are reviewed on a monthly basis by the NAMA board.

The Deputy will also know that on the 7th February 2013, I issued a Direction (NAMA/3/12/IBRC Act) to NAMA pursuant to the IBRC Act 2013 to provide such credit facilities to the Special Liquidators appointed to IBRC on such terms and conditions as specified in the direction. This was done in order to protect and preserve the value of the IBRC assets during the liquidation process and ultimately to protect the interests of the taxpayer.

NAMA has complied with this Direction and made a €1 billion credit facility available to the Special Liquidators. NAMA has made this facility available in accordance with its approved liquidity policy and from its liquid assets. NAMA advises that the granting of this facility does not impact on the Agency’s ability to redeem its Senior Bonds in accordance with the previously indicated redemption targets or its ability to fund its operational and development capital costs.