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Minister for Finance Jack Chambers secures government approval on the General Scheme of the Conclusion of IBRC Special Liquidation and Dissolution of NAMA Bill 2024.
The Minister for Finance Jack Chambers has today secured Cabinet approval for the priority drafting of the Conclusion of IBRC Special Liquidation and Dissolution of NAMA Bill 2024.
The legislation when enacted will facilitate the orderly conclusion of the Special Liquidation of the Irish Bank Resolution Corporation (“IBRC”) by the end of 2024, and the dissolution of the National Asset Management Agency (“NAMA”) by the end of 2025 in accordance with NAMA’s 2021 Strategic Plan.
This legislation follows updates published earlier this year by Minister Chambers’ predecessor, the then Minister for Finance Michael McGrath, that the Special Liquidation of IBRC is on track to substantially conclude by the end of 2024 and that NAMA is now taking commercial and operational steps to implement a phased and orderly wind-down by end-2025.
In line with the experience of other workout vehicles internationally, it is likely that there will remain some residual activity for both entities after their work has concluded. To manage this residual activity from 2026 until completion, the legislation will provide for a new Resolution Unit to be established within, and resourced by, the NTMA following the dissolution of NAMA at the end of 2025.
The Minister has drawn attention to the extensive progress made by both the IBRC and NAMA since their inception. Through the Special Liquidation process, approximately €1.7 billion has been paid by IBRC to State agencies through the unsecured dividend payment process and the first surplus transfer from the IBRC to the State was received in December 2023, totalling €35 million. Deleveraging activity will continue through to the end of 2024 with further realisations to come. By the time NAMA is dissolved at end-2025, the NAMA Board currently projects that NAMA will have generated a lifetime return of at least €5.2 billion to the Exchequer, building on its internationally recognised success to-date. €4.25 billion of NAMA’s projected surplus has already been paid to the Exchequer.
Prior to the conclusion of their respective work mandates, both the IBRC and NAMA will continue to deleverage their remaining portfolios, in an effort to minimise the residual activity due to be inherited by the Resolution Unit and maximise the possible return to the State on the remaining assets.
Speaking about the proposed legislation, Minister for Finance Jack Chambers said:
“I am pleased to have secured government approval today on the proposed General Scheme of the Conclusion of IBRC Special Liquidation and Dissolution of NAMA Bill 2024. This legislation will importantly provide for necessary arrangements to allow both NAMA and the IBRC Special Liquidation to conclude their respective work mandates, including through the establishment of a Resolution Unit in the NTMA to manage any residual activity of both entities from 2026 until completion.
"The Special Liquidation of the IBRC commenced over 10 years ago, with a loan portfolio of par value of €21 billion, consisting of over 15,000 borrower groups and supported by collateral based in 22 jurisdictions worldwide. I want to take this opportunity to formally acknowledge the exceptional progress made by the Special Liquidators of the IBRC in maximising the return on IBRC’S portfolio, with €35 million having been returned to the Exchequer in December 2023 and further realisations to come. At the time of the publication of the Tenth progress update report in 2023, the remaining loan book had a par value of €3.6 billion.
"NAMA, which was established 15 years ago this December, has been cited internationally as one of the best examples of a successful implementation of a State-backed asset management company in response to the global financial crisis. NAMA inherited a multi-jurisdictional loan book with a par value of €74 billion comprising 60,000 properties and 5,000 individual borrowers. It fully repaid all €32 billion in debt issued to acquire loans and has been fully self-financing throughout its lifetime. It has made an important social and economic contribution to the development of the State, funding and delivering over 37,000 new homes to date and delivering over 3,000 social housing homes, as well as driving the regeneration of the Dublin Docklands area. NAMA has entered its final phase in a strong position thanks to the exceptional progress it has made in recent years. NAMA projects a lifetime surplus of €5.2 billion from its operations and I have every confidence in the NAMA Staff and Board to continue to deliver the best value from its remaining portfolio as it works towards conclusion by end-2025.”
The General Scheme of the Conclusion of IBRC Special Liquidation and Dissolution of NAMA BILL 2024 provides for the conclusion of the Special Liquidation of the IBRC and dissolution of NAMA in the following manner:
(1) The conclusion of the Irish Bank Resolution Corporation (IBRC) Special Liquidation (SL) by end-2024 and the transfer of any remaining residual activity to the National Asset Management Agency (NAMA);
(2) The dissolution of NAMA by no later than end-2025 and the transfer of any remaining residual activity associated with both NAMA and the IBRC SL to the National Treasury Management Agency (NTMA) for management from 2026 to conclusion;
(3) The establishment of a new Resolution Unit in the NTMA to manage residual activity of the IBRC SL and NAMA following the dissolution of NAMA, from 2026 until completion of this residual activity; and
(4) The amendment and repeal of certain elements of the Irish Bank Resolution Corporation Act 2013, the National Asset Management Agency Act 2009, the National Treasury Management Agency Act 1990 and the National Treasury Management Agency Act 2014.
On 7 February 2013, the Oireachtas passed legislation (the Irish Bank Resolution Corporation Act 2013) appointing joint Special Liquidators (the “SLs”) to IBRC with immediate effect, to wind up its business and operations.
The IBRC loan portfolio had a par value of €21 billion, consisting of over 15,000 borrower groups and was supported by collateral based in 22 different jurisdictions worldwide.
The COVID-19 pandemic impacted both litigation timelines, asset values and asset realisation strategies. Consequently, in 2021, based on analysis provided by the SLs, the Minister for Finance agreed that the SLs extend the timeline for completion of the liquidation to the end of 2024 in order to achieve the best possible return on the remaining assets while also progressing the remaining legal cases which IBRC are party to.
The liquidation is on track to conclude by the end of 2024. However, it is likely that there will remain unresolved litigation at this time and there also remains uncertainty around the disposal timeline of a number of assets, primarily those located in foreign jurisdictions. There remain 10 assets in the IBRC’s portfolio which have disposal strategies in place, however, as a result of the Russian invasion of Ukraine in 2022, there is uncertainty in relation to the disposal timeline in particular for assets based in Russia and the Ukraine. Therefore, it is necessary to make appropriate arrangements in relation to the management of any residual activity post-2024.
As there are significant similarities between the deleveraging and litigation work undertaken through the Special Liquidation of IBRC, and the existing work and expertise in NAMA, it is considered an efficient use of State resources for NAMA to acquire any assets, liabilities, and residual activity from the SL by the end of 2024.
NAMA was established in 2009 as part of the State’s response to the 2008 banking crisis to deal with non-performing property loans acquired from Irish banks. At that time, NAMA acquired 11,500 land and development and associated loans from five financial institutions, with over 800 debtor connections, an acquisition value of €32 billion and a par value of €74 billion.
NAMA was set up with a very specific mandate, which received EU Commission approval and set a requirement for the Agency to conclude its work by the end of 2021. A periodic review of NAMA by the Department of Finance in 2019 (under Section 227 of the NAMA Act) recommended that the Agency continue beyond its expected wind-down date of 2021 in order to maximise the value of the remaining portfolio. An application was made to the EU Commission requesting an extension to the timeline of NAMA whereby the Irish State confirmed to the EU Commission that NAMA ‘commits to disposing of its residual residential loans before end of the December 2025 and it is intended that NAMA will be dissolved by that date subject to outstanding litigation.’
Since that time, NAMA has been operating in line with its statutory mandate to achieve the best commercial return from its acquired loans. In line with obligations of the European Commission, NAMA will conclude its work no later than the end of December 2025 and it is on track to complete much of its activities in line with this approved timeline. In November 2021, the NAMA Board submitted to the Minister for Finance its Strategic Plan for the orderly wind-down of the Agency and is currently implementing this plan. NAMA’s priority focus is on the completion of most of its deleveraging activity before the end of 2024.
In line with the experience of workout vehicles in Ireland and other jurisdictions, the resolution of the NAMA entity may take several years after completion of its deleveraging activity to deal any unresolved litigation and remaining assets including those loans secured by assets which are considered to have significant potential value uplift.
With 18 months remaining in the lifetime of NAMA, it is necessary to make suitable arrangements for the management of any residual activity of NAMA after this time. The complete dissolution of the entire NAMA infrastructure by the end of 2025 is not feasible and it was always envisaged that some assets may still be on NAMA’s Balance Sheet, and some litigation cases would be outstanding at end-2025.
The two key challenges to the achievement of wind-down by end-2025 are the pace of deleveraging and the timeline for asset disposal and the significant level of work still required to resolve par debt and the exit of the debtor connections.
In order to manage any residual activity from 2026 until completion, a Resolution Unit will be established within the NTMA. This unit will be responsible for managing all residual activity as well as any residual debtor and asset management activity required.
As set out above, the completion of the majority of activity before the end of 2024 is a key milestone for progressing the wind down of NAMA and it is important that any residual activity to be transferred to a resolution unit is minimised in so far as practicable. Further information on the proposed approach to this is set out in Section 3 below.