NAMA Details

NAMA background documentation here. No announcements about average haircuts for AIB and BOI and how much of the average 30% discount is in the Anglo loans. Very disappointing.

120 replies on “NAMA Details”

EUR 77 bn Loan Values today

EUR 54 bn LTEV to be Paid by NAMA

EUR 47 bn Current Market Value => EUR 7 bn Premium
EUR 94 bn of Original Loans (assumes -50% drop on original peak value)

we still dont know the details of how this beast is to be financed! Extraordinary. Truly contemptuous of the people. suck it up……
Its also truly amazing that a minister can come to the parliament , say something is worth x (47b) and then states its his intention to overpay by 15% (54b). Amazing…

The last paragraph of Section One of Page 9 seems the problematic one. It states that the pricing assumes that asset prices will increase by 15% and notes that if they decline by 10% the taxpayer will suffer a loss. Development land prices have actually fallen much more than 50% so I think that this might be problematic. It looks like perhaps with objective valuation the taxpayer is already deep into a loss without any decline of asset prices needed. This requires more careful study so I am not being categorical just trying to get to grips with this long document.

Wowzers, so the ‘long term economic value’ is HIGHER than the current market price on average?
I would have thought significantly lower for at least residential property, based on yields out there – but then again, do we even know how much of this is in residential?
Wait, that’s probably a silly question!

Would anybody be able to tell me why NAMA is shelling out 54 billion when Lenihan stated that the market value is 47 billion. Weren’t we promised by Lenihan for months that current market values would be paid for the assets?


As I understand page 7, the haircut of 30% excludes the 9% rolled up interest. It sets the book value of the rolled up interest at zero, and then calculates the haircut on the remaining book value?? If so, that increases the effective haircut and is good news for the taxpayer. Is this correct?

The breakdown of the €77bn loans is interesting.

Land: 36%
Development: 28%
Associated loans: 36%

In money terms, that is approx €28bn in ‘associated loans’. Does anyone know what we are spending €28bn on? I presume €9bn of this figure is the rolled-up interest. What is the other €19bn? And what are the LTEV of these?

“An asset value at origination of approximately €88 billion is assumed having regard to institution estimates of average LTV at origination
and NAMA estimates of interest roll up.”

The information Gov is dealing with does not include the original loan values ?

Thanks Brian, right so whats going to come out of this in the media for Mr.Joe Irish Public is that the government are giving the banks a premium for their assets.

If Fianna Fail aren’t buried for a generation already hopefully this minor soundbite will do it for them. I suppose if one decent thing comes out of the NAMA legislation….

No, i dont think that thats correct. As I see it from page 8 the rolled up is included. The total “real” is 68, plus 9 rolled up, for which 54 (70%) will be given.

Don’t know about you guys but the entirety of the calculations are a real cause for concern –

One way to look at it would be to say 54bn to be paid on 88bn of original loans, so effective haircut is > 30% or 38.6%

But this is a false way of looking at it, as 9bn of that total is rolled-up interest.

A better approach would be to take the 77bn (post-Bank writedown figure) and subtract the 9bn => haircut is less at closer to 31.6%

Don’t really know if any of these figures are really relevant

Yes, there is an admitted, deliberate, calculated overpayment of 7,000,000,000 ; thats what, 1750 per capita. And thats just the overpayment of which we know.

I don’t think that is correct. On p. 7 it says:

“• The current book value of the total loans that NAMA has identified for potential acquisition is approximately €77 billion.

• Of these loans approximately €9 billion is rolled up interest. When NAMA is determining the market value of the assets it will first
exclude the rolled up interest –giving a net balance of approximately €68 billion.”

This suggests that the 30% haircut includes rolled up interest.

@ Brian

still bizarre that we dont know how its financed. Irritating.

@ Ed

the Minister has always said it’d be the Long Term Economic Value (LTEV) that’d be paid, as allowed per ECB and EU rules/agreement.

@ Brian L

The 9bn roll-up on the 68bn bal excl. roll-up => 13.25% of the loan book

Surely given where interest rates have been, this implies developers have not been servicing loans since 2006?

@Eoin….thanks but Lenihan has picked this LTEV figure out of which part of his anatomy?

Brian Lenihan Minister for Finance/TD/Tarot card reader…

Brian Lenihan, this afternoon …

“It is expected that NAMA will purchase loans with a book value of approximately €77 billion.

The approximate breakdown is as follows:

Allied Irish Bank €24 billion

Anglo Irish Bank €28 billion

Bank of Ireland €16 billion

EBS €1 billion

INBS €8 billion”

On the assumption that (i) the price paid of €54bn can be roughly allocated proportionately to the loan book values above and (ii) the “book value” BL refers to includes any bad debt write-offs already made within banks, the impact on the equity of the banks could be as follows:

Book value Price paid Loss Capital I Capital II
Anglo 24.0 16.8 -7.2 0.1 -7.1
AIB 28.0 19.6 -8.4 12.1 3.7
BoI 16.0 11.2 -4.8 6.9 2.1
EBS 1.0 0.7 -0.3 0.6 0.3
INBS 8.0 5.6 -2.4 1.2 -1.2
77.0 54.0 -23.0 0.9 -2.1

Implications: (i) INBS may be insolvent, (ii) former Anglo shareholders can expect zero compensation for nationalisation (iii) BoI and AIB need large equity injections from State.

Not to sure about the 18% as the interest will have been capitalised or financed with additional loans

@ Derek

the 9bn is suprisingly high. Lets say it relates to the 60% of loans that are not performing, so thats 46bn. And lets say its spread evenly across all the loans, which on average have an interest rate of 5%. So 4yrs of rolled up interest?? Am i correct?

@ Derek

i’d suggest that this has at least some sort of explanation (chiefly that the development land would generally require some sort of interest roll up whilst building a development) but it sure would have helped if they broke it down into ‘expected roll up’ vs ‘distressed roll up’.

Minister has said that the bonds wont be seen as effectivly state bonds. This is despite the bonds in the legislation ranking pari passus with the existing stte bonds

The assumption of any recovery in property prices appears to be completely fanciful. Houses for example need people and there already seems to be substantial departures.

Below is a link to a piece on progressive economy, suggesting that up to 200,000 may already have left.

Further emigration will considerably reduce the need and demand for all those empty house. Morgan Kelly’s estimates of the movement of the property market still seems the most accurate to me.

Therefore it appears that he is considerably overpaying and the citizens will be left with a serious bill.

Assuming that AIB takes the average 30% discount it will take a hit of €7.2bn.

AIB currently has €8.6bn in Tier I capital and risk weighted assets of €134bn.

Post NAMA it will have risk weighted assets of €114bn so will need about €7bn of capital post NAMA.

AIB will need €5.6bn in new capital and current market cap is €2.3bn.

Where would that put the governments equity stake?

@any NAMA expert

I don’t claim to be an expert on NAMA, so this is just by way of a query.

Are the figures given by Brian Lenihan today considerably less than those bandied about in the media in recent weeks, and which were used by Morgan Kelly in his Irish Times article yesterday? If so, is that good news?

For example:

Was the 77 billion figure for loan values not previously put at 90 billion in media reports in recent weeks and in Morgan Kelly’s article yesterday?

Was the 23 billion figure for the gap between the loan values and what NAMA will pay not previously put at 30 billion in media reports and in Morgan Kelly’s article yesterday?

Are any of the NAMA experts here challenging these new lower figures of 77 billion and 23 billion respectively? Do any think that Brian Lenihan’s estimates of 77 billion and 23 billion respectively are wrong, and that Morgan Kelly’s estimates in yesterday’s Irish Times of 90 billion and 30 billion respectively were correct? If not, does that mean that the previous figures of 90 billion and 30 billion were Morgan Kelly exaggerations? Is it because the figures given by Brian Lenihan today are considerably lower that the ISEQ has shot up today?

Unqualified apologies to Morgan Kelly if I got all this wrong.

MK predicted trough at circa 33% of peak.
Mulcahy said typical 7 year increase is +88% of trough.
Current MV is estimated at 50%.
Minister says we need +10% of current MV within 10 years to break even.
MV Trough (33% of peak) * 88% uplift = 62% of peak
Current MV (50% of peak) * 10% uplift = 55% of peak

Does this mean that NAMA may break even based on MK figures notwithstanding that MK says uplift will be slower to come?

I consider the Minister’s statement about needing this uplift within 10 years to be disconcerting considering that he has previously said that he hopes to sell off a large proportion (multiple packages) of NAMA assets in the near future.


In fairness to Morgan Kelly the figure of “up to” €90bn was a figure used by the Minister when he first announced NAMA. He subsequently said this may be revised downwards but we only got the real estimate today.

@ Dreaded Estate

have you factored in what AIB will be able to ‘regain’ from their impairment provisions?


Bank of Ireland to issue trading statement at midday tomorrow.

Assume more recapitalisation news should be coming from both of them soon.


Blame the Minister not me:
“Taking the subordinated debt into account, it is estimated that NAMA will have to achieve less than a 10% uplift over the current market values on its assets over ten years to break even.”

Why do you say he has left them out? As Brian Lucey and Eoin have already pointed out, we still don’t know the funding costs.

One error I did possibly make was confusing property values and bank asset values!

I haven’t got me head around this one yet, so where better to throw it out.

There’s 7,000,000,000 added for long term economic value. NAMA is buying loans not property! Anyone spot a problem here?

FYI, Bank of Ireland are releasing a statement tomorrow at noon and incorporating a trading statement up to 30 Sep. Might pick up some detail on per institution discount there.

Could people please start using their surnames – or at least a distinguishable alias – when commenting on this? I may be on the bottom rung but I’d still like to be in control of what is attributed to me.

Trying to simplify the scene . State buying 77B of loans . However State already owns 28B of these loans (Anglo) —-so new buy is 49B. Discount of 23B –average 30%. Based on how “off Beam” Anglo was run it is very likely that current value of their 28B is far below 70%. IT therefore looks like AIB and BOI are being “over shaved” to “subsidise” Anglo???

I used the June-2008 figures

Using the latest June 2009 data

AIB capital €10.2bn
Risk weighted assets €131bn
Tier I Ratio 7.8%

Post NAMA and recap
AIB capital €3bn
Risk weighted assets €107bn
Capital Needed €8.3bn

Recap €5.3bn

Eamonn Ryan has just said
a) yes, that old saw, te ECB will pay for it
b) we need more debt.

this in the dail…..


i guess ALBK and BKIR will have to disclose the effective LTVs they are transferring their respective portfolios at. as previously mentioned, an aggregate portfolio haircut of 30% is potentially misleading as it can be distorted by the ANGL haircut, which should be excluded.

Kieran O’Donnell made a good point about rental yields saying rents are falling and will continue to fall.

Plus landlords are giving longer rent free periods and cash back incentives to hide the actual falls in rents.


This might be the only time yourself, Kieran O’Donnell and I agree on something. I for one will cherish the moment 🙂 .

just to add to my short question above. In order to claim a 7bn ltev gain based on a 15% rise in market value, you’d need to reposess all properties. If you reposess half the underlying properties, you’d need a higher rise in values to get 7bn. Unless I’m missing something?

I think the O’Donnel chap fro FG made a good point that the Minister is using the fact that rental yields are higher than their historic average in order to forecast that property prices will rise. The minister seems to assume that rental yields will come back down to their historic norm as property prices (the denominator in the yield equation) rise. However any reduction in the rental yield is likely to be as a result of falling rents and not property price increases. Also the comparison to historic yields is skewed by the unusually low yields experienced at the height of the boom.

77 B
1. book value including rolled up interest

9 B
2. rolled up interest

68 Billion
3. book value setting book value of rolled up interest equal to zero = item 1 – item 2

4. loan to asset value at origination (excludes rolled up interest)

88.311 Billion
5. property asset value at origination = item 3 / item 4

6. decline in property asset prices

46.805 Billion
7. implied market value of underlying property assets = item 5 * item 6

8. haircut setting book value of rolled up interest equal to zero = 100% – item 7 / item 3

9. haircut against loans with book value of rolled up interest included = 100% – item7 / item 1

Now I note on the next page that NAMA plans to deliberately over-pay by 15% thereby paying 54 billion for assets which they agree have current value of 47 billion (optimistic in the first place). So that is 7 billion of taxpayer money lost for nothing based on unsupported and over-optimistic property price forecasts.

Can we assume then that the Banks are still carrying 13 billion worth of toxic debts on loans of less than 5 million?

That, to my mind anyway, does not inspire a great deal of investor confidence.

@PR and Eamonn K

They like it in New York – Nice gift of Irish taxpayers’ futures converted into the present as a present to shareholders in the Irish banks. Think I’ll pass on next time I see the phrase ‘moral hazard’ anywhere ……………

It’s comforting to know that the document was vigorously proofread before publication.

From Page 9 (end of section 1)

Potential total book value of loans 77

30% haircut on loans 30%

Price NAMA could pay for loans 54

This is a Stimulus package (Brian Cowen) of free money (Sean Fleming) as the taxpayer won‘t contribute anything. Sure the British and Germans are doing the same (BL). It will get the country moving and ensure assets increase in value (BC). We are at the bottom of the property market (BL). The banks can get rid of those pesky bonds we are going to print on the international market and if that fails the nice people at the ECB have agreed to take them for a small haircut(BL). Its simple Paddy’s QE.

The Greens got a huge concession (5%) of risk sharing and 80% windfall profit tax on nothing. A social dividend means all applicants for housing can move to the country-that will replace the Civil Service move.

Sure what is wrong with our own Irish Stimulus Package.

I think I am suffering from acute Namaitis.

Batt O’Keeffe just now, explains how bonds are to be used, cashable through international markets and ecb – therefore:

“tens of billions of euro from outside the country will be pumped into the country, stimulating our economy”.

Are we going to pay 70% of 8billion of rolled up interest this is unlikely to be recovered. If so then we can add this to the 7b overpayment

When you add in the 15% overpayment (for very hypothetical abnormal returns on property) and exclude rolled up interest, the haircut falls to 20.84%. It looks like the years of faithful campaign donations by the property development industry to Brian Cowen and Brian Lenihan and other FF politicians have earned a very high rate of return for those developers — their best investment on a per-euro basis. Not so great for the Irish taxpayer who has to pay an enormous deadweight cost on the order of 10+ billion euros.

77 Billion
1. book value including rolled up interest

9 Billion
2. rolled up interest

68 Billion
3. book value setting book value of rolled up interest equal to zero = item 1 – item 2

4. loan to asset value at origination (excludes rolled up interest)

88.311 Billion
5. property asset value at origination = item 3 / item 4

6. decline in property asset prices

46.805 Billion
7. implied market value of underlying property assets = item 5 * item 6

8. arbitrary increase in market values to account for forecast abnormal returns to property assets over the life of NAMA holding period

53.8259 Billion
9. increased long-term economic value of property assets = item 7 + item 7 * item 8

10. haircut setting book value of rolled up interest equal to zero = 100% – item 9 / item 3

11. haircut against loans with book value of rolled up interest included = 100% – item 9 / item 1

The loan book category could need some more explanation.

The figure that is given for land, is that for land where the developement hasn’t started (or at least not been finished) but has been rezoned for property development?

What are the associated loans secured on?

As per the document, the LTEV of land can’t be higher than 25% higher than the current market value. The windfall tax is likely to push up the market value of development land but I’m still concerned about the large amount of loans secured against land.

Up to 10bn more might be spent on finishing developments, should that not be seen as a cost as well or at least as a contingent liability when calculating the cost of taking over these loans? Or is that already included in the value of the loans?

Pete Maguire Says:
September 16th, 2009 at 6:51 pm

Batt O’Keeffe ….. “tens of billions of euro from outside the country will be pumped into the country, stimulating our economy”.

Money for nothing.

O’Keeffe is using a variant of the Quantitative Easing Defence of NAMA.

I know some disagree. But this is not QE, this is the issuing of Sovereign debt.

So can anyone tell me or give an estimate of the amount of money in the banks that are from regular depositors?

Also could anyone explian what exactly senior debt holders are and the amount of money that is in the banks from them?

Jesper Says:
September 16th, 2009 at 7:26 pm

“Up to 10bn more might be spent on finishing developments…”

The original (consultative) bill included a provision for €10Bn to be borrowed by NAMA in the pursuit of its goals. This was to have been guaranteed by the State. Further monies could be borrowed by NAMA without guarantee.

The Greens got the €10BN (guaranteed) reduced to €5Bn (guaranteed).

I believe €5Bn, at a minimum needs to added to the €54Bn.

This €5Bn will be borrowed in the market.

This changes the haircut in the wrong direction from the taxpayer/citizen perspective.

@ Noel

Aib has a balance sheet of roughly 175bn (2008).

Of this:
customer deposits (including corporates) was 78bn
interbank deposits was 52bn
senior debt was 26bn
derivative instruments was almost 6bn
subordinated debt 3.6bn

Senior debt is the most safe form of liability on a bank balance sheet, of equal rating to customer deposits, and therefore shareholders and subordinated debt holders must take any losses a bank makes before senior debtholders will be at risk.

Prior to the credit crisis senior bank debt was considered an ultra safe investment and was considered almost on a par with soveriegn debt. It is considered the lifeblood of the financial system, and so most sane-minded people feel that exposing this class of investor to any losses from a banking insolvency would cause enourmous problems for the entire financial system (ie it happened with Lehman Brothers), as many investors may not be willing to finance banks anymore without massively increasing the cost to the banks. This would therefore severly limit the ability of banks to extend credit, and it would ultimately cost customers much much more to borrow money.

In calculating the haircut on distressed loans, it is necessary to take out the performing loans out of the 77bn. The minister stated that 40% of the loans were generating cash flows (but did not state if all of these loans were fully performing). One polar estimate can be generated recursively. If the maximum uplift for long-term economic value is 25%, then a ceiling would be that this is applied to 28bn of the 47bn of loans at market value (25% of 28bn is 7bn!). This leaves 21bn of the 47bn to be classified as ‘performing’. In turn, if 21bn is performing, then the non-performing element of the 77bn is 56bn and the haircut is (56bn-21bn)/56bn=62.5%. Equally, the already-taken writedown from 88bn to 77bn also only applies to the non-performing component, giving an all-in haircut of (67bn-21bn)/67bn=69%.

So the haircut on distressed loans should be much bigger than the average haircut on the whole portfolio, given that performing loans are also in the mix. While the calculations above provide an extreme bound, it is useful to take into account the heterogeneity.

Another implication however is that the LTEV premium assumed here is the 25% max envisaged in the bill and that is a harder target to reach. In general, the LTEV premium will be mostly relevant for the non-performing loans, so again the averages discussed in the speech may be misleading.

@ Brian

I don’t think anyone wanted to see the bank shares go through the roof as a result of NAMA (bar AIB/BOI shareholders, obviously, though that also includes the State now so…), but i think a 30% jump in the share price is better than a 30% drop?

I mean, one of the key, indeed THE key, purposes of NAMA was to stabilise the financial institutions in the State in order to facilitate a recovery in the economy. As such, it appears to be doing that. I would have also thought that a continued recovery in the share price should help to encourage external private capital for the recapitalisation process, possibly meaning that the State doesn’t have to take as much of the burden?

Brian Lucey Says:
September 16th, 2009 at 7:55 pm

“aib now up 30% in new york….wow, lenny really imposed pain there didnt he?”

AIB up 30%. Irish Citizen/Taxpayer down 30%.

Sounds about right.

Eoin Says:
September 16th, 2009 at 8:32 pm

Who do you work for and how much do they pay you?

A “real world actuality”.

@ Futuretaxpayer

“This leaves 21bn of the 47bn to be classified as ‘performing’. In turn, if 21bn is performing, then the non-performing element of the 77bn is 56bn”

Are you suggesting that the 21bn of NAMA loans are being valued at 100%? I don’t think this is the case. As an example, the subordinated debt of AIB and BoI is still ‘performing’, but it sure as hell don’t trade at 100….

Eoin Says:
September 16th, 2009 at 8:40 pm
@ Futuretaxpayer

“As an example, the subordinated debt of AIB and BoI is still ‘performing’, but it sure as hell don’t trade at 100….”

What are they trading at Eoin?

@ Greg

none of your business Greg, but it aint AIB or BOI, or indeed any bank taking part in NAMA. I also own no shares in any of the NAMA banks, nor will i derive any material benefit from any uplift in their bond or share prices. I have no skin in the game other than being a taxpayer.

Opposition to NAMA should not lead people to be indifferent to the monetary stimulus implied by its design. It is QE. For that reason, I support it in concept. With M3 here shrinking at an annual rate of 10%, we need every bit of monetary stimulus we can get.

That said there are strong reasons to doubt NAMA will suceed in getting credit going again:

1. Real interest rates are extraordinarily high, putting a dampener on demand for credit. Mazars reported – in their recent analysis of funding for SMEs – that “the value of new applications for credit decreased by an average of 42%”.
2. Banks may use fresh funding to improve thier own liquidity rather than that of SMEs and personal borrowers. This appears to be the case in the US where broad money has declined alarmingly over the last three months accordiong to Tim Congdon.

The overpayment for loan assets by NAMA is the biggest political and moral argument against it. AIB is up 26% in trading on the US markets this evening. I agree with Morgan Kelly that Irish property prices probably still have a long way to fall.

NAMA is necessary but this asset pricing isn’t.

@ Greg

whats the deal, do you just ask random questions or requests of other people all day, or is it just me you’ve taken a strange liking to? The sub debt trades at anywhere between 35 and 75 cents depending on the maturity profile and subordinate level.

Eoin Says:

September 16th, 2009 at 8:47 pm
@ Greg

whats the deal, do you just ask random questions or requests of other people all day, or is it just me you’ve taken a strange liking to?

It’s just you.

I think a lot of commentators here expect the Irish government to stick it to investors/markets etc. and fight moral hazard to a much greater extent than the US and UK governments did.

From a moral perspective, that’s probably the right thing to do, but unfortunately I think the horrible mess we’re in means that it’s simply not feasible – we’re an insignificant wart on world markets so taking a more principled stance than enormous countries like the US and UK would in my view be punished. Markets are not rational – read the chapter in Paul Krugman’s book ‘The Return of Depression Economics’ about the Mexican economic crisis – ‘market psychology’ is a scary thing.

Any bailout the Irish banks are getting pales into insignificance when you consider the AIG/Goldman bailout for example.

As my post indicated, the 21bn was meant to be an extreme case, with my main point just to illustrate that the performing loans do have to be excluded to calculate the haircut.

The AIB statement this evening says that 7bn of their 24bn is performing. Let’s say all in that 10bn is performing to be more realistic about it, then the new haircut on the non-performing loans is 44.8% and all-in haircut is 52.6%. In relation to LTEV, the 37bn market value of the distressed loans (47bn-10bn) is projected to increase by 18.9%.

@ Greg

this is supposed to be an intelligent and insightful economics blog. You might be better served over on Facebook or, indeed, Bebo. Failing that you can always set up your own blog and talk to yourself on that.

@ Futuretaxpayer

apologies, just wanted to make sure all the figs were correct. Thanks.

You will have to step through those figures because I can’t see how you are getting to a 18.9% discount

Are you assuming a 0% discount for the performing loans?

“Can we assume then that the Banks are still carrying 13 billion worth of toxic debts on loans of less than 5 million?
That, to my mind anyway, does not inspire a great deal of investor confidence.”

I’m with you and sold last week. I can see a share surge tomorrow but this could dissipate as people realise the banks are not out of the woods yet. Hard to see how you can value the banks in 2 years time. May be they are worth €6 or €9 but they may also still be worth nothing. I’ll be interested in BOIs comments tomorrow.

At this stage we are where we are. We might as well get a move on. History will judge who was right and who was wrong.

Eoin Says:
September 16th, 2009 at 9:04 pm

Will you accept the apology of a man, given sincerely, who sees his country being sold out for beads and then lashes out at one he does not know?

I hope you can Eoin.

My anger at the immorality of the sell-out got the better of me and I lashed out.

I can do no more than apologise and stick to the numbers.

@Greg @Eoin

Bit of moral outrage is healthy at times – keeps one sane. Lets get back to the arguments. This was a big day ……….

@ Derek

yeah, saw that. Still don’t ‘get’ it, seems problem-prone. Dont understand why these aren’t 2yr or 5yr or whatever in nature other than that it should mean the coupon on them is slightly lower. Still seems odd when you consider the rollover issues.

Im thinking of buying a house thats on the market for 470,000.

I believe that its worth less than that because property prices will fall more.

Therefore im going to pay 540,000 for it.

This may seem crazy but dont worry because even though its a 20 year mortgage im getting the money cheap for the first 6 months.

What could possibly go wrong ?

because they want and need to be able to show that “nama makes a profit”. /thats why its at 6m 1.5pct. For the optics. The reality is much much different. He has now confirmed that the state will be borrowing 108b pa (2*54=108) plus EBR for the next n years….

@Brian, Eoin

It is a very high credit spread. It is the Emperor’s New Clothes.

Also, I suspect that the ECB may have insisted on ultra-short duration as a quid pro quo for facilitation

Lenihan said the more risk that was put into the banking system “the less they will be able to lend”. He said the figure of €54 billion was an estimate, not a finalised figure. “The figure is subject to detailed legal valuation of each loan.”

Is this ‘detailed valuation’ the same one that will be cloaked in ‘commercial confidentiality’? i.e. could we end up paying even more than this ‘estimate’ of €54 billion??

There are going to be a lot of inverted commas out today!

@Brian L,

The sinking feeling in my gut must be affecting my brain, but, even though I can understand the liability will be in excess of 54b, I can’t see how you get to your 2*54b.

I would value some enlightenment – I am sure others would too.

Thank you.

@ Paul

its a nice cheap playing with words. If the rollovers were monthly we’d be borrowing 650bn pa on the same ‘logic’…

The other thing that I don’t understand is this 28 billion of associated loans.

Is this rolled up (unpaid) interest and the 25% equity stake the developers were supposed to have put up (but borrowed from another bank)?

@ Eoin

The Minister went on air on Newstalk last week and unless my ears deceive me he assured the public that they had “fixed” the bonds at 1.5% coupon and that they would be much longer dated than 18 months. This was when he was being challenged over the interest rate exposure issue.

That is what I would call an expensive play on words coming from the Minister for Finance who is trying to win the trust of an electorate.
Perhaps on mature recollection he meant to say a lot less than 18months and variable rate coupon.



so much for ecb free lunches, “quantitative easing” etc.

taxpayer gets about about 40Meuro/bp of interest rate exposure with rates going only one way

meanwhile banks are all hedged up

I am finding it impossible to ascertain the estimated value of the underlying value of the real property upon which these loans are secured.

I set out to see what was the difference between
(i) the current MV of the underlying security made up of real property, and
(ii) the current MV of the banks assets (i.e. loans)

The paper referes to “Estimated current market value of underlying asset – €47bn”
It continues…
“If NAMA actually pay €54 billion as the acquisition value of the loans it would represent a 30% haircut on the book value of the €77 billion loans.”

“NAMA estimates, based on the application of the statutory adjustment factors, that the long term economic value will present approximately 15% of an uplift on the current market value of the loans identified for transfer. ”

€47bn * 1.15 = €54.05

Therefore, it seems clear that “current market value of underlying asset” is the surrent market value of the loans not the real property. So what is the value of the real property??

“Based on work undertaken by the interim NAMA in relation to certain of the guaranteed institutions i.e. Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Nationwide Building Society, Educational Building Society,approximately €77 billion book value of loans have been identified as eligible loan assets likely for transfer toNAMA.
• This €77 billion, estimated by the institutions, is made up of approximately €49 billion land and development and approximately €28 billion associated loans.
• The portfolio identified for potential transfer consists of almost 2,000 customers with approximately 21,500 loans.
• The average loan to value (LTV) rate for these loans is approximately 77%.
• NAMA estimate that of the total €77 billion portfolio identified for potential transfer to NAMA, approximately €9 billion is interest roll up.”

What does the LTV figure refer to?????

Does it relate to €77bn or to €49bn? I expect it relates to €77bn but the documentation is far from clear.

What does the V in LTV refer to? Is it the value of all underlying property? Or is it the value of all assets including Liam Carroll’s shares in Aer Lingus?? What was the associated 28bn used to buy is not property?? Was it shares??

Imagine the Property “V” in LTV only refers to the €49bn
– €49 billion land and development
– Average LTV of 77%
– value of property at peak approx €49bn * 100/77. = €63.6bn
– Assuming approx 50% decline in values then Current value of property = €36.8bn
That could mean that our €54 bn is secured on €36.8bn property + other unknown assets.

Or perhaps the €28bn associated loans relate to built commercial property as opposed to land and development? That is hardly likely. It is surely a mix of investment properties, shares and other smart arse schemes.

It is peculiar that the “€28bn associated loans” includes the full €9bn rolled up interest. Why is this? Is it to boost the LTV or is it so we can see what is being valued as rolled up interest is to be excluded from LTEV?

[“When NAMA is determining the market value of the assets it will first exclude the rolled up interest –giving a net balance of approximately €68 billion.” What exactly does first mean? Presumably oince it is out it cannot come back in??]

This means that €68bn of impaired loans are estimated to be valued at €47bn. That means LTEV of loans gives a haircut of 20.5%.

“When NAMA is determining the market value of the assets it will first
exclude the rolled up interest –giving a net balance of approximately €68 billion.”

“In the realisation of NAMA acquired loan portfolio it is estimated asset prices would have to recover by approximately 10% to avoid any loss to the taxpayer and taking the
subordinated debt into account.”

There is also no figure that I have seen for the portion of loans done in concert with non-NAMA banks.

Only 40% of the loans are performing, so presumably only 40% of the loans will generate increased interest income when interest rates rise.

For the remaining 60%, we as the owners of NAMA are bearing the interest rate risk.

Will the reported interest rate swaps be able to reduce our exposure?


If only it were that simple!

They are “cash flow producing”. Whether they are “performing” is a different matter! What level of performance is implied by “cash flow producing”? How much interest can it pay?

Also, we are not told it is 40% by value as opposed to 40% by number. The lack of detail is infuriating and is discrediting the whole process.

Brian Lenihan: “Further details of the loan books of the institutions are contained in the supplementary documentation. It is projected that 36% of the assets will be land, 28% development property and 36% in associated commercial loans. The estimate is that 40% of these loans are cash flow producing. The cash flow produced will be sufficient to cover interest payments on the NAMA bonds and operating costs. The geographical breakdown of the assets is about two thirds in Ireland, one fifth in Great Britain, 6% in Northern Ireland and most of the remainder in the USA and Europe.”


What do people make of the fact that loan values need to recover by 15% but property values only need to recover by 10%??

share prices being up are not ‘from the taxpayer’, its a secondary market, the talk of a transfer to the equity holders is slightly off in that the prevention of being wiped out is different than share price gains. but the lines get fudged so often. like the difference between the value of a ‘loan’ and the ‘underlying asset’.

the share prices is only part of it AIB tier 2 is up today from 103 to 111, and yield still +10%.

the question now is when will the road-shows begin?

@Karl W: I didn’t say it was anybody in particular, I said ‘the lines get fudged’ meaning the message delivered is sometimes presented in a way that doesn’t lend itself towards the readers ability to interpret the difference between the two.

“the question now is when will the road-shows begin?”

I disagree. I think the question is should this “road show” begin, or some other better solution.

But seeing as you’re apparently involved in mortgage brokering, I can understand your desire to get this “road show” on the road.

Thanks Karl.

I’ve never been a big fan of the passive voice in economic commentary — lines get fudged, mistakes get made etc.

I know one of the things some people dislike about my contributions here is my occasional insistence on taking exact quotations from what people say and interpreting their meanings (people think I’m picking on them.) But I think it’s best to generally be precise about who one is criticising and why, otherwise people can draw incorrect inferences.

And encouraging incorrect inferences is …. mischievous.

@Karl W and others

Ah – yes ‘meanings’ and hemeneutics enters Irish economics discourse ….. and discovering all these ‘known unknowns’ …… and insufficient data/information on emerging Naa-Maa such that experts on this blog have difficulty in interpretation at the figure/fact level ….(fascinating)….. and mischief …….. and political spin …. incredible stuff! Keep up the work.

Globally – it is business as usual (and we are now laggards within it) – a return to the ‘warped’ system circa 2006 and we will all be back to where we started in the near future. Discourse on regulation etc will diminish ……. and forgetfullness and silence rather than enforcement will be suggested as pragmatic ………….

Have we seen any increase in funding/resources etc to Office of the Director of Corporate Enforcement – how about 5% of the 7 billion to signal some seriouness on ‘governance’ etc as the ‘cowboys’ once again sail off into the sunset with their saddle bags gilded in the now with future citizen/taxpayer debt.

Here are my predictions for Nama
1. They will go in and discover things were worse than they thought – hopefully at the loan due diligence stage before they pay. This is a fairly regular occurence in the world of financial reporting – drip feed the bad news. It’s part of the don’t scare the horses scenario.
2. As pointed out these are loans not actual property Nama is acquiring. Wait till we find the security wasn’t properly in place or is a bit hazy or double committed. Trigger lots of legal cases as the big developers try to come out of this with as much money intact as they can.
3. Only loans >€5m are going to Nama. This excludes the thousands of amateur property investing Joe Public at home and abroad. BOI increased their provisions yesterday and will do so again and again. Nama II is on its way.
4. Lots of stories on Joe Duffy about how the banks won’t lend to support businesses through the bad times and huffing and puffing on radio and in the newspapers.
5. Nama needs new premises as its cost expands and goes on for longer than the average tribunal.
6. The government will end up owning a lot more of the banks than they do now.

When I read contributions like Padraigh’s above claiming to be so concerned about the taxpayer’s interest, two thoughts come to mind.

1. The preference share\warrant deal that Padraigh is so enthusiastic about involved the state paying €7 billion to potentially acquire a 25% stake in two banks that could have been purchased off the open market at the time for €1 billion. Great deal.

2. Anglo is indeed an extraordinarily expensive regulatory failure for the Irish state. But remember that if it hadn’t been nationalised, guys like Padraigh would be on here now telling us we need to pay a high enough price to Seanie and David so that they can keep their bank in private ownership.

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