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Chartered Accountants NAMA Forum 23 March 2010 Michael McAteer FCA

Chartered Accountants NAMA Forum 23 March 2010 Michael McAteer FCA. Contents. NAMA – The numbers The workings of NAMA Business plans. Potential size of development portfolio. Banks in NAMA. Banks outside NAMA. Banks not currently in NAMA Ulster Bank have an exposure of €15 bn

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Chartered Accountants NAMA Forum 23 March 2010 Michael McAteer FCA

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  1. Chartered AccountantsNAMA Forum 23 March 2010Michael McAteer FCA

  2. Contents • NAMA – The numbers • The workings of NAMA • Business plans

  3. Potential size of development portfolio Banks in NAMA

  4. 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

  5. Asset Location

  6. Timeline of Loan Transfer to NAMA

  7. 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)

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. Michael McAteer FCAT: +353 (0)1 6805 738E: michael.mcateer@grantthornton.ie

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