Outline framework of Nama taking shape

ANALYSIS: While debate rages about Nama, behind the scenes plans are proceeding apace . . .

A RELATIVELY small number of civil and public servants using outside advisers have been working over the past number of months on the creation of the National Asset Management Agency (Nama), the success or otherwise of which will have a strong bearing on the State’s economic fortunes over the coming decade.

The nine-member board of the new agency will be a key determinant of the success or otherwise of the project, and will be appointed by Minister for Finance Brian Lenihan once the Bill creating Nama passes into law. In making the appointments he will be guided by the legislation (see panel).

In the meantime, an outline shape has developed for the proposed organisation, and a view formed as to how it will work. No template was used to devise a shape for Nama, which will have a mix of public and private sector employees that is understood to be unique.

Based in the National Treasury Management Agency (NTMA) building on Grand Canal Street, in Dublin, the acting managing director of Nama, Brendan McDonagh, has been working since May with two key steering groups, one concerned with policy and the other concerned with drafting the Nama Bill. Work has also been carried out on preparing a provisional structure for the agency. The key members of the policy steering group have included: McDonagh; John Corrigan, (like McDonagh a director of the NTMA); Aideen O’Reilly, (senior legal adviser to the NTMA); and Sean O’Faolain, (a deputy director of the NTMA); Kevin Cardiff (a second secretary with the taxation and financial services division of the Department of Finance); Ann Nolan (an assistant secretary with the sectoral policy division of the Department of Finance); and William Beausang (an assistant secretary with the department’s taxation and financial services division).

Also involved were a number of key civil servants from the Attorney General’s office as well as, on a less concentrated basis, civil servants from other departments, including staff from the Revenue Commissioners.

The group has received assistance from HSBC Investment Bank, Arthur Cox solicitors, and PricewaterhouseCoopers with the three giving advice, respectively, on banking and finance matters, legal issues and taxation. The team from HSBC is based in London but has been staying in Dublin Monday to Friday to work on the Nama brief. Matt Webster of HSBC has been the main adviser on issues to do with valuing bank loans, while managing partner Pádraig Ó Ríordáin has been heavily involved with the Arthur Cox team.

Many of the same people have been involved in the drafting of the Nama legislation where Attorney General Paul Gallagher SC has chaired some of the drafting sessions.

Once established Nama will have a nine-member board that will create a structure for the organisation. Acting managing director McDonagh has been appointed already and it is envisaged that a number of heads of functions will be appointed. There is likely to be a head of credit, who will make decisions on such matters as whether a loan will be “rolled over” or called in. There is also likely to be a person who will be in charge of a portfolio management unit. This unit will manage the properties Nama will take ownership of when persons or companies default on loans for which the properties are collateral. Decisions as to whether to hold, sell, or develop particular properties will be taken by this unit. There may be also a head of legal affairs and a head of risk. In all it is envisaged that Nama will have approximately 70 to 80 staff, working within the NTMA, with recruitment to begin as soon as the legislation is enacted.

Already some 1,700 CVs have been received, most of them from professionals from the property sector such as surveyors and engineers. As is the case with NTMA staff, each person will negotiate their own employment terms.

Five banks will seek to have loans moved into Nama. They are: AIB; the Bank of Ireland; Anglo Irish Bank; Irish Nationwide; and the EBS. Although ownership of the loans will be transferred to Nama, the banks will continue to manage the loans on Nama’s behalf, though the key credit decisions will be taken by Nama. In relation to the largest 100 to 150 borrowers, their affairs will be managed directly by Nama.

Each institution has established a Nama division to deal with the loans likely to be transferred, and has been working on extensive lists of questions from Nama about the loans. The answers to these questions will be used by Nama to put values on the loans.

Also, isolated IT systems within the institutions are being established which will deal with the loans to be transferred to Nama. In time Nama staff may take up positions within the institutions to oversee their work on the Nama loans.

Over the next month it is expected that a number of specialist services will be engaged through the tendering process to provide assistance on valuing loans and examining banking and security documentation to ensure it is in good order. (Loans on which security is found to be weak or inadequate can be refused by Nama.) Specialists will also be engaged to value interest swap deals and other banking arrangements or derivatives that lenders might have. A panel of property valuation experts will be engaged to value property against which loans are secured.

In relation to incomplete properties or developments that Nama might end up owning and decide to complete, it may engage the services of property developers though it is thought very unlikely that a developer who initiated a project and then went bust, would be given charge of completing that project on behalf of Nama.

Colm Keena is Public Affairs Correspondent