Slide Title EDUCATING SUPPORTING REPRESENTING title goes here Borrower Survey Chartered Accountants NAMA FORUM Conor O’Brien CA NAMA Forum Committee 13 October 2010 Dublin

INTRODUCTION Survey overview Summary survey findings Detailed survey findings Lessons learned

SURVEY OVERVIEW Purpose – Survey the experiences of borrowers to date – Identify the challenges faced by borrowers Population – 22 questionnaires issued to Top 30 borrowers – 59% response rate Confidential survey

SURVEY OVERVIEW Profile – 62% corporate borrowers – 70% have submitted business plan to NAMA – Of which 11% at initial review stage 78% at independent review stage 11% at approval stage

SURVEY OVERVIEW KEY SURVEY FINDINGS – In advance of transferring, banks have been pressurising borrowers to agree to new financing terms – including increased margins and additional security. – Banks did not provide accurate dates of transfer or, in many cases, even notice of the likely transfer date. – Where queries arose, NAMA did respond to questions reasonably promptly, but the answers did not address all questions and additional clarifications were required. – The most common approach to preparing business plans was to prepare them in-house with limited input from external advisers. In-house resources typically were in the range of 6 staff members preparing the business plan for, on average, 12 weeks. Firms on average paid €147,000 for external input into the plan. – Borrowers were quite critical of the format and complexity of the datapack required to be submitted with the business plan.

SURVEY OVERVIEW KEY SURVEY FINDINGS (CONT.) – The experience of the independent business plan review was mixed. The main sources of concern were that the reviewer was operating in isolation, with no feedback provided to the borrower from the review team. The potential for incorrect assumptions and conclusions arose because there is no opportunity for the borrower to discuss the findings of the independent review team. Some borrowers questioned the extent of property experience of the independent review team. – In light of public comments by the agency, borrowers are still struggling with the question ‘what is NAMA?’ Is it a bad bank, a work out vehicle, a property company or a liquidation vehicle? – Borrowers think that NAMA needs more resources and expertise to do its job effectively. – Some borrowers had loans transferred that included approved but as yet undrawn facilities. The experience to date has been mixed with the majority of those who did make a subsequent application being able to draw down funds. 40% were either refused or are still awaiting a decision. 75% of requests to sell property since transfer have been approved.

SURVEY OVERVIEW KEY SURVEY FINDINGS (CONT.) – In terms of borrowers’ applications to sell, lease or seek other required consents regarding their property, NAMA are adjudicating on recommendations from the banks within 1-2 weeks. The speed at which the banks are forwarding recommendations to NAMA (on foot of borrower applications) can vary – with 6-12 weeks being mentioned by a significant number of respondents. In total the time experienced to have the required consents issued between the banks and NAMA can be in excess of 8 weeks. There is disquiet amongst borrowers that this period of time is excessive and gives a competitive advantage to non NAMA funded developers. – Respondents suggested several improvements in the process of making decisions including delegating to banks the approval for routine transactions. Another suggestion was the removal of the personal liability clause which applies to submitters who make applications for NAMA consents. – Borrowers want more practical engagement with NAMA (for example, in terms of access to present business plans and make decisions) because this engagement will lead to better decisions. To date NAMA has sought to minimise interaction with borrowers.

SURVEY RESULTS

PRE TRANSFER TO NAMA

Did your bank provide an accurate date for the transfer of your loans to NAMA?

PRE TRANSFER TO NAMA How much advance notice did you receive from your lender of the likely transfer date of your loans to NAMA?

PRE TRANSFER TO NAMA 54% of participants procured working capital in the 6 month period prior to transfer to NAMA 8% of participants received bank funding for the preparation of the business plan 54% 8%

PRE TRANSFER TO NAMA Did your lender pressure you to agree to new financing terms prior to the transfer to NAMA?

PRE TRANSFER TO NAMA 40% 40% of participants banks demanded fees for changes to loan conditions in the run up to NAMA

NAMA COMMUNICATION

85% of participants contacted NAMA with questions on the loan transfer process prior to transfer 100% of participants received a response from NAMA 85%100%

NAMA COMMUNICATION How long did it take NAMA to respond?

NAMA COMMUNICATION Did the response by NAMA address your questions?

NAMA COMMUNICATION Was your lender knowledgeable with regard to the NAMA process and how the process would impact on your business and banking arrangements? ‘the bank was... focused on getting their paperwork in order.’ ‘.... varied by bank.’ ‘...relationship people.. didn’t know the loan was being transferred.’

BUSINESS PLAN

85% of respondents commenced the preparation of the business plan prior to the transfer of loans to NAMA. 85%

BUSINESS PLAN Did you prepare the business plan in house or engage external professional advisors to do so?

BUSINESS PLAN Average 6.4 staff preparing the business plan for 12 weeks Average external advisor cost of €147,

BUSINESS PLAN

NAMA FUNDING

Have you received funds from NAMA under these facilities?

NAMA FUNDING Reasons for not receiving funding? Adequate cash to fund expenditures

NAMA FUNDING

LESSONS LEARNED

NAMA Engagement with Borrowers – Currently Arms Length – Engage directly with borrowers – Allow borrower management teams present business plan to NAMA – Meet on site to discuss property specific issues Communication with Borrowers – Clarity of responses – Publish FAQs One size does not fit all – Business Plan Lite – Datapack

LESSONS LEARNED Decision making process – Length of decision making process – Competitive advantage with non NAMA funded developers – Delegate to banks the approval for day to day transactions – Remove personal responsibility clause of submitter Business Plan – One size fits all does not work – Appoint reviewer at early stage to shape and agree business plan requirements – Relevance of using business plan format for a non property business Independent business plan review – Reviewer operating in isolation and potential for incorrect assumptions – No opportunity for borrower to discuss findings of independent review team – No feedback provided to borrower from review team – Extent of property experience of independent review team – Provide guidance as to what is and is not acceptable in the business plan

LESSONS LEARNED BANKING Address communication of transfer dates Other themes What is NAMA? – Bad Bank, Work out vehicle, Property Company, Liquidation Vehicle Expertise within NAMA – NAMA needs more resources – Bring independent review expertise within NAMA