Tom

A black box. Just don’t open the box…… But we will in a few years time. Like torturing children, the longer the events are in the past the less anger there will be. Justice delayed is justice denied.
Remember Iceland!

As clearly established by all the key will be the valuation of the assets with there having to be an exit plan from the beginning vis a vis asset disposal in order to fix the value of what is transferred – some plans regarding a target market for disposal of assets and sequencing strategy must be developed now. Part of this exit plan could be quick disposal of some of the assets to generate the seed working capital for the agency (or provision of some funds by government during its establishment)? These initial disposals could of necessity be at the lower end of the valuation range and this fact built into the overall loan markdown.

Looking at NAMA as a project the NPV of NAMA should be zero – the value of bonds issued to the banks should reflect this aspirational position and take into account all the projected costs (including that of working capital, coupon payments, salary, fees etc.) and repayment/asset disposal cashflows in determining this value.

Removing all performing and non-performing loans can imply a wish to have a cut it all away and “what is left is ok” approach or alternatively bringing all loans with associated guarantees etc. into the same pot is driven by need to give as much more visibility as to overall status of each borrowers portfolio and facilitate working out on a borrower by borrower basis rather than a project by project basis?

a) So much shysterism has gone into this via creative accounting its hard to seperate what is genuinely good and genuinely bad
b) If a developer keeps his “good” loans with the bank and leaves the rubbish with NAMA, how are we going to force the guy to pay anything bank to NAMA? The definition of not performing is it wont pay back….

Obviously, he will try to keep the bank sweet focus on the good stuff to make some profit, whilst walking away from the bad stuff…..

The creation of NAMA who owns all the bad stuff without visibility into any of the good stuff puts NAMA at an even bigger serious disadvantage when dealing with an individual developer.

No, if youre a developer and you have some good stuff and some bad stuff, lump it all together with one entity, ban that developer from any dealings with any other institution and bring out the rubber gloves….

If you’re willing to take commercial mortgage risk, this is a much better option. You’re diversifying risk across countries, there is subordinate risk and you’re getting a much higher coupon.

Too many people think just because the government have “decided” on Nama then we should just get on with it.

The basis for Nama seems to be highly political.
not that we should be surprised as consultant reports are often used to give a veneer of independence to highly politicised decision.

Dr. Bacon appears to have reported under two constraints.
No overt nationalisation.
No default on subordianted liabilities.

Taxpayer risk was not a constraint.

The facts that The Irish Times hasn’t replaced Paul Tansey (RIP) and that RTE plans to replace George Lee with an economics correspondent rather than an economics editor speaks volumes. That’s one major reason why this website is so valuable.

The reason for transferring performing loans may be to prevent any perceived rescue of builders. If I am right then it is purely a political reason.

The hoi polloi want to see the builders destroyed. The politicians are happy to help to save their own skins. If you need to liquidate a developer then you will be better placed if you own the charges over all related properties. Otherwise you may be into a quagmire where you want to chase assets that other banks have a charge over.