NAMA business plan version 2
This article first appeared in Construction Magazine, the official magazine of the Construction Industry Federation
The National Asset Management Agency (NAMA) was established in 2009 as part of the Irish Government’s response to the Irish banking crisis and the deflation of the Irish Property sector. NAMA’s function is to acquire the land and development loans from the Irish banks and managing the recovery of this debt over time. Part of NAMA’s initial issues involved understanding the loans being acquired and associated assets; valuing the underlying assets in an illiquid market and determining the best route forward to get the debt repaid by the debtor. Much of this information was to be provided through the NAMA business plan process. Initially, NAMA published its template Business Plan Version 1.
Following the transfer of Tranches 1 & 2 of loans to NAMA (30 debtors, €27bn par debt), NAMA identified the requirement for a more property focused business plan template, providing standard formats and reducing complexity for borrowers. NAMA also sought to remove the onus from debtors to perform complex financial analysis. For this reason, NAMA engaged Deloitte to assist it with the development of a new template – Business Plan Version Two (BPv2) which includes:
• NAMA Business Plan Version Two template document
• NAMA Information Pack (NAMA IP)
• NAMA Cashflow Model (NAMA CFM)
Due to the scale of the number of loans acquired by NAMA, it has decided that it will directly manage the top 170 debtors consisting of c. €59bn par debt whilst the balance of 680 debtors will be managed through the Participating Institutions (PIs) under the instruction of NAMA. All debtors will be required to produce a Business Plan Version Two business plan.
NAMA objectives and key assumptions
As part of its guidance to debtors, NAMA has identified five of the NAMA board strategic policies as key objectives which should be considered by all debtors as they prepare their business plan and when providing recommendations to NAMA in respect of future debt reduction strategies.
- Debt reduction – targeting substantial reduction by Year 4
- Cash sweep – unless otherwise encumbered
- Working capital – managed tightly
- Development funding – as little as possible and should be de-risked and value enhancing
- Income generation – constant focus
In order to prepare a standardised information collection tool and financial model, NAMA and Deloitte had to consider a number of assumptions to include within the functionality of the NAMA IP and NAMA CFM. All assumptions made are set out clearly at the front of each model. It is not anticipated that these would materially affect the outcome shown by the debtor in its business plan and certainly will not adversely affect the final outcome.
NAMA information pack
For the debtor, the NAMA IP is the key workbook and the main point of input for the various elements of information required by NAMA. If completed properly, the NAMA IP will provide a comprehensive and accurate picture of the debtor’s properties; other assets, loan facilities and central corporate costs.
NAMA IP has the following capacity which, based on NAMA’s review, should satisfy the vast majority of debtors yet to submit their business plan to NAMA:
- Up to 20 facility groups (either NAMA and Non NAMA) allowed for each debtor
- Up to 10 accounts allowed within each facility group
- Up to 15 assets (of varying type and status) allowed to be allocated to each facility group
- Up to 15 assets (of varying type and status) which are unencumbered and do not relate to one of the 20 facility groups
In advance of inputting data into NAMA IP, we suggest that the debtor gathers the information on the various assets and facilities and groups these in a meaningful way such that these assets which are directly linked with particular facilities will be subsequently input together. NAMA IP provides plenty of guidance and instructions to debtors throughout the models. We advise that the debtor approaches the input process in a methodical manner and follows the instructions and order as set out in the Instructions worksheet. This will result in a trouble-free completion of NAMA IP.
The facility summary template has been designed to allow the debtor to easily provide the various elements of information required by NAMA for each debt facility (NAMA and Non NAMA) held by the debtor. The template requests information that would generally be available to the debtor from the original or updated facilities agreement in respect of each loan. If necessary, the debtor should contact their original funding bank for the information.
Debtors should complete only the relevant asset template sheet for each element of an asset, based on the options set out below:
- Commercial - completed commercial buildings which do not require any further development
- Residential - completed residential units that are held either for sale or rent and require no further development expenditure
- Land and development - relates to any type of development (commercial or residential) which has yet to be completed at the time of the NAMA IP model being completed and any undeveloped land/land banks
- Hotel and trading – hotels, bars, nightclubs, golf courses, health & beauty etc
- Other - these relate to any other assets not captured by the four other templates provided
It should be noted that in certain cases where a development is partially complete, a number of templates can be completed to capture the fully developed areas and those still to be developed/completed.
Group Information relates to costs and revenues which cannot be specifically allocated to particular assets within the debtor’s portfolio.
Input TD copy and input TI copy
The worksheets labelled “input TD copy” and “input TI copy” are produced automatically by the NAMA IP based on all of the information provided by the Debtor on each of the Facility Sheets and Facility Asset Sheets and the Group Information (if applicable). The debtor is not required to input any further information into either of these worksheets.
These two worksheets provide the link between the NAMA IP and the NAMA CFM and the debtor is only required to copy these two worksheets, following the clear instructions provided in the NAMA CFM, and paste them into the mirror image input sheets in the NAMA CFM.
NAMA cash flow model
The NAMA CFM was developed so that debtors could easily provide the detailed financial analysis to support their business plan. The NAMA CFM has the functionality and calculations contained within the workbook such that once the debtor has copied the inputs from the NAMA IP, the NAMA CFM will automatically generate the 10 year cashflow projections at varying levels within the debtor’s structure and will produce the tables and charts which are to be included within the debtor’s business plan document.
Once the inputs are transferred, the debtor is only required to utilise the automatically generated output tables and charts for their business plan document – no further work is required by the debtor.
NAMA business plan template document
NAMA has provided a template document for debtors to follow as part of their business plan submission. It is therefore important that debtors follow the provided structure when preparing their business plan document; however it is equally important that the business plan actually reflects the business being presented and hence the debtor should also include any additional information which the debtor believes is pertinent to explaining the overall business.
As a significant portion of the template document involves tables and charts from the NAMA CFM, we suggest that the document is the last element to be completed to ensure it is consistent with the overall strategy included in the numbers.
Differences between BPv1 Document and BPv2 Document
The main differences between BPv1 and BPv2 are set out below. The key point is that while the business plan should be easier to draft, the NAMA objectives for the business plan remain constant.
- Inclusion of a sworn Statement of Affairs in BPv2
- Tables and charts required in business plan are automatically generated by the NAMA CFM based on the inputs provided by the debtor in the NAMA IP – link between the models and the output document
- Full Connection View in BPv2
- NAMA and Non NAMA lenders
- Encumbered and un-encumbered assets
- Group income/assets/liabilities
- No historical financial information required except for opening balance sheet
- Clear focus on debt reduction strategy in line with NAMA objectives
Completing business plan version 2
The completion of the NAMA IP and the NAMA CFM and the writing of the business plan document is only part of completing BPv2. Debtors must also consider carefully the strategy it proposes to NAMA in relation to achieving the required levels of debt reduction within NAMA’s required timeframe.
Debtors are required to consider all methods of asset value maximisation and debt reduction available to them, including the following:
- Asset management
- Asset disposal
- Involvement of third party equity
- Debt disposal
- Debt refinancing
Once the debtor has identified the optimum strategy for all stakeholders and reflected this within his business plan (NAMA IP, NAMA CFM and Business Plan document), the business plan is submitted to NAMA and the review and discussion phase commences. Once the business plan has been considered within NAMA, a Memorandum of Understanding will be issued by NAMA for discussion with the debtor. This document must then be agreed between the two sides and an implementation plan developed and initiated.