Experiences for Vietnam from Ireland’s debt trading company model
Three years ago, Ireland had a national debt trading company set up in an attempt to fight bad debts in the wake of banking crisis.
NAMA was established on 21 December 2009 with five entity members including Allied Irish Bank, Bank of Ireland, Anglo Irish Bank Corporation, EBS and Irish Nationwide. For a legal boundary for its operation to be guaranteed, a bill was also passed by the Irish Parliament one month earlier.
NAMA took three major responsibilities namely purchasing debts, building relationship with debtors and debt repayment.
As for debt purchasing, the five members are required to define legal loans and then provide loan details including the remaining balance on loans, mortgaged real estate and assets. Also, related lawful problems and real estate pricing should be reported to NAMA. All such information would be put under serious consideration before reaching a final decision on whether to obtain any loans.
Purchasing prices of loans would basically depend on the mortgaged property. Real estate item that is pledged as collateral for a GBP 100 million loan, for instance, is currently worth GBP 60 million, the loan would be purchased at solely GBP 60 million bang.
This group is directly involved in managing 180 largest debtors who account for some 61 billion pound in book value of the entire attained debts. Each debtor must submit its own business plan, most important purpose of which is to reveal financial health as well as procedures and schedule of repaying debts to NAMA. Normally, these business plans would be evaluated in terms of feasibility, effectiveness and expected cash flows by an independent consultant, which would ultimately be reassessed either by the management board, general director or deputy general director of NAMA.
Moreover, debtors’ cooperation with this company and corporate governance quality would also matter. Should business plans not be approved, alternative measures that would be imposed on debtors in the event of failure to make debt repayment or non-cooperation would be applied. However, this company would rather aim at reaching as much agreement as possible with debtors on debt settlement.
Repayment schedule would be closely monitored by NAMA and responsible staff would be assigned to be in charge of all the collateral.
This firm expect to cut down total debts by 25pct in 2013, 80pct in 2017 and 100pct in 2019.
Category: Finance
