Please note this is subject to additional lists being issued if new amendments are approved.
There is alot of reading there!!
Fair play to Joan Burton
But on the eight list
“(5) It shall be an obligation of a participating institution to publish the names of
all developers and associated companies whose loans have been acquired by
NAMA, including specification as to whether these loans are performing, have been
in any way restructured, or in default.”.
—Joan Burton
Not being an expert in this, but surely the banks can tidy up all this to suit themselves before reporting month bu month developments???
Probably in there somewhere…
I mentioned a few weeks ago the possiblity of an ammendment that limits the minister of finance from ‘certain’ actions from the date of a fall of a government/calling of an election.
Al
35.—NAMA shall prepare, publish and submit to Dáil Éireann for consideration,
a business plan including a Corporate Operational Plan on an annual basis,
including an overview of the outlook for interest rates and evolution of yield
curves.”.
If not why not.
Quick scan,
The powers of the “Minister” are substituted by an “Oireachtas Committee on NAMA”. Correct?
And if not why not.
Of course the Act can be amended at a later date.
This will be a test of Brian Lenihan. My guess is that he will rule out as many of the opposition’s motions as he can on the following grounds:
– poorly drafted.
– already covered in the existing bill’s provisions.
– possibly unconstitutional.
– will legislate for at a future date if necessary.
– Good. But his legal advisers will have to look into it.
– Will accept. But wants to amend just a teeny weeny bit.
On the other hand, with judges talking about 80% price falls, and him wanting to pay 58% of peak value, he may make lots of legislative concessions to get Nama through.
If he, however misguidedly, believes that Nama will succeed, and if this is an honest process, he will accept all the opposition’s amendments.
If he won’t accept the opposition’s amendments…..
Is it really sensible for Fine Gale (Richard Bruton, Kieran O’Donnell) to attempt to create a “National Recovery Bank” by amendment?
They and everyone else knows that this is going nowhere in the current environment.
❓
SECTION 66
“(5) It shall be an obligation of a participating institution to increase lending to
SMEs and first time buyers to such an extent as is specified in agreements made by
the participating institutions with the Minister whether before or after the passing of
the Act and in the absence of such agreement, to the extent specified by the
Minister.
No mention of the risks of such lending.
The banks would asks the such “additional” lending be underwritten by the State
After all they are already lending to creditworthy borrowers.
What criteria would apply to “first time buyers”. 100% LTV.
What protection would first time buyers have if the market falls another 20% – 30%.
This may look good but it could trap even more people in debt.
“(5) It shall be an obligation of a participating institution to enter into a
Memorandum of Understanding with the Minister ensuring that they will not sell
NAMA bonds on the open or secondary debt markets.”.
Indeed.
Can’t have NAMA issuing bonds at par only for them to be picked up at 60c in a few years and then presented for repayment at par on maturity.
Still, nobody knows how these bonds will be structured.
“(5) It shall be an obligation of a participating institution to publish the names of
all developers and associated companies whose loans have been acquired by
NAMA, including specification as to whether these loans are performing, have been
in any way restructured, or in default.”.
And if not why not.
(a) the long-term economic value determined by NAMA for a parcel of land
shall not exceed the market value of the parcel by more than such
fraction as the Minister may determine by regulations for the purposes of
this paragraph,
—An tAire Airgeadais.
The Minister intends overpaying for Land.
❓ 🙄
An aside – on the subordinated loans, NAMA will only pay out if NAMA makes a profit. Surely this mitigates against the effectiveness of the subordinated bonds as an incentive to the banks to work out the loans properly. If Anglo or AIB blows the €2.7bn then what is the incentive for BoI to work out its loans properly????
@zhou
Even those parts of Nama which are not, per Stiglitz, criminal, will probably be bungled by the failed technocracy. I would expect that on top of everything else that is wrong with Nama the senior bureaucracy will make a lot of gigantic – but entirely innocent – howlers. They could have brought in outside help from Sweden but they, and the politicians, are far too arrogant and parochial to do this. You may remember how when Sir Humphrey of “Yes Minister” started in the civil service he was put in charge of legal negotiations relating to a site. “Of course I had no legal training whatsoever”. Years later his hugely costly error was discovered. Jim Hacker graciously forgave a for once panicing Sir Humphrey.
Years later we too will draw a simple lesson:
Governments should not make €59 Billion investments in the property market, and overpay, and on flexible interest rates…
It will be far too late.
lots of politics in there, pity our government doesn’t have more people who came from the business community in it. monthly reports etc. will ensure that the admin costs go through the roof if accepted. allowing lease breakage due to the landlord being in NAMA is kind of counter purpose, it will make it harder for the developer in question to service their loans! think i’ll get cryogenically frozen and come back in 2025, should all be sorted by then.
Still no post on this “private” Nama – the ARC. The rationale behind a Government bailout is obvious enough but what on earth can private individuals hope to gain by a similar venture. I have an uneasy feeling that somehow this is tied in with Nama – and probably to our cost – but maybe some experts in here will cast light on what might be afoot.
To paraphrase Boyle Roche -I smell a rat; I see him forming in the air and darkening the sky; but can we nip him in the bud?
@ Aidan
I don’t see anything too suspicious about ARC. But if it’s a private firm, then it’s not a bailout. Unlike NAMA, presumably they’ll look to pay as low a price as possible. I’ve read some silly stuff about this along the lines of “it’s good news that anyone can think they’d make a profit out of Irish property” but the truth is that you can make a profit out of anything if you buy it for a low enough price.
@ zhou
“An aside – on the subordinated loans, NAMA will only pay out if NAMA makes a profit. Surely this mitigates against the effectiveness of the subordinated bonds as an incentive to the banks to work out the loans properly. If Anglo or AIB blows the €2.7bn then what is the incentive for BoI to work out its loans properly????”
I mentioned this before Zhou.
If losses are pooled (not segregated) Anglo will gobble up the lot.
AIB & BOI will end up subsidising the Anglo bailout.
That out to help get credit flowing.
@ Aidan
“Still no post on this “private” Nama – the ARC. The rationale behind a Government bailout is obvious enough but what on earth can private individuals hope to gain by a similar venture.”
1 ARC will not be forcing anyone to sells loans to them. Both sides to a transaction will agree a value for loans transferred.
2 ARC will off an equity stake to those selling loans.
3 ARC will raise equity & debt in the market.
4 ARC will, presumably, run a tight ship (no €2.6Bn of fees or like proportion)
5 ARC and its investors believe it can make a profit.
6 ARC will not be paying over “market” value.
7 ARC’s market value will likely be considerably less than NAMA’s “market” value, and that’s ignoring LTEV.
In short if we were being offered ARC rather than NAMA I’d be happy.
Sure the banks would need recap. But that’s a different matter.
Bye the bye the ARC risk sharing seems to me to be quite close to Honohan’s idea.
I’m not an expert.
@Karl
Thanks .. probably just my paranoia acting up.. I had the impression though that Nama only made sense to the banks if the loans were overpaid?
@ Eamonn76
“Even those parts of Nama which are not, per Stiglitz, criminal, will probably be bungled by the failed technocracy.”
Maybe we could have a whip round and hire Stiglitz.
😀
@Greg – thank you also – comments crossed – sorry for dragging this thread off topic there
I have focussed on the CSO document which is a smarter version of the
additional info provided on 16 Sept.
We are a step futher on in relation to how the estimated LTEV of loans
was calculated.
The letter from the CSO to Eurostat states:
“NAMA purchase price (LTEV) NAMA est. [(1) x 70%] 54”
This suggests that LTEV was based on a discount from book value rather
than on MV of property values or indeed MV of loan assets.
The fact that the route by which th LTEV of loans was arrived at in the
estimates is so arbitrary suggests that the DoF are enforcing a
“haricut” based on book value rather than some other measure of the MV
of the loans or the MV of the property. Again, the MV of loan assets
is neither estimated nor discussed.
The “premium” being the difference between MV of loan assets and LTEV of
loan assets is not disclosed or discussed.
We are told that the LTEV of loans is an estimate but one could
(questionably) infer that the only variable in the LTEV of loans is the
book value of theloans to be transferred. However it is also possible
that the 70% is a variable. However, there is no clarity on this
point.
I would also point out that there is an error in the CSO document at
page 2 where it says:
“(8) Current market value of properties [(3)x [100%-(7)]] 47”
The reference to “(3)” is an error and should refer to “(5)”.
I point this out as another example of shoddy document preparation on
the part of the DoF. It really annoys me and it is certainly not
We know that the ratio of land:devt:commercial loans is 36:28:36.
“36% of the loan assets will be backed by land and 28% by development
property. The remaining 36% consists of associated commercial loans.”
We also know that foreign loans make up 33% of the land securing the
loans:
“The geographical spread of the property associated with the loan assets
is: Ireland: 67%, Northern Ireland: 6%, rest of UK: 21%, USA: 3%, Other:
4%”.
(However, we are not told whether this is 33% of current land MV
or 33% of peak MV of all land or 33% of loan book value [or 33% of acreage 🙂 ].)
The most logical assumption is that the 33% refers to current MV.
This tells us that the MV of foreign property is €15.5bn based on total
MV of €47bn (33% of €47bn = €15.5bn).
It also tells us that the total MV of Irish property is €29.6bn based on
total MV of €47bn (67% of €47bn = €29.6bn).
We also know that foreign property is assumed to have dropped by 40%
from peak.
This gives us a maximum peak value for foreign property of €25.85bn.
This tells us that the minimum peak value of Irish property is €62.15bn.
Assuming:
1) a peak value of €62.15bn for Irish property based on the above
calculations
2) a 60% drop in Irish Land & Development property as per CSO doc
3) a 50% drop in Irish Commercial property as per CSO doc
4) a current MV of total Irish Property security of €29.6bn (based on statement in CSO doc that “The geographical spread of the property associated with the loan assets is: Ireland: 67%…”)
THEN we can deduce that
(I) ratio of Irish Land & Development Loans to Irish Commercial Property Loans is approx 28%:72%.
(II) approx current MV of Irish Land & Development property is approx €7bn.
(III) Assuming an LTV of 77% from peak, the approx book value of Irish Land & Development loans being assumed is approx €13.4bn
This seems impossible to square with the overall ratio of land: devt: commercial loans of 36:28:36 !!!!
It is also impossible to square with the fact that the total Irish Land & Development loans disclosed in the supplementary documentation on 16 Sept came to €37.2bn.
Can anyone else make the figures stack up? I am Alan Shattered at this stage.
APOLOGIES – TIDIED UP VERSION AS FOLLOWS:
I have focussed on the CSO document which is a smarter version of the additional info provided on 16 Sept.
We are a step futher on in relation to how the estimated LTEV of loans was calculated.
The letter from the CSO to Eurostat states:
“NAMA purchase price (LTEV) NAMA est. [(1) x 70%] 54”
This suggests that LTEV was based on a discount from book value rather than on MV of property values or indeed MV of loan assets.
The fact that the route by which th LTEV of loans was arrived at in the estimates is so arbitrary suggests that the DoF are enforcing a “haricut” based on book value rather than some other measure of the MV of the loans or the MV of the property. Again, the MV of loan assets is neither estimated nor discussed.
The “premium” being the difference between MV of loan assets and LTEV of loan assets is not disclosed or discussed.
We are told that the LTEV of loans is an estimate but one could (questionably) infer that the only variable in the LTEV of loans is the book value of theloans to be transferred. However it is also possible that the 70% is a variable. However, there is no clarity on this point.
I would also point out that there is an error in the CSO document at page 2 where it says:
“(8) Current market value of properties [(3)x [100%-(7)]] 47”
The reference to “(3)” is an error and should refer to “(5)”.
I point this out as another example of shoddy document preparation on the part of the DoF. It really annoys me and it is certainly not tolerated where I work.
************************************
We know that the ratio of land:devt:commercial loans is 36:28:36.
“36% of the loan assets will be backed by land and 28% by development property. The remaining 36% consists of associated commercial loans.”
We also know that foreign loans make up 33% of the land securing the loans:
“The geographical spread of the property associated with the loan assets is: Ireland: 67%, Northern Ireland: 6%, rest of UK: 21%, USA: 3%, Other: 4%”.
(However, we are not told whether this is 33% of current land MV or 33% of peak MV of all land or 33% of loan book value [or 33% of acreage 🙂 ].)
The most logical assumption is that the 33% refers to current MV.
This tells us that the MV of foreign property is €15.5bn based on total MV of €47bn (33% of €47bn = €15.5bn).
It also tells us that the total MV of Irish property is €29.6bn based on total MV of €47bn (67% of €47bn = €29.6bn).
We also know that foreign property is assumed to have dropped by 40% from peak.
This gives us a maximum peak value for foreign property of €25.85bn.
This tells us that the minimum peak value of Irish property is €62.15bn.
Assuming:
1) a peak value of €62.15bn for Irish property based on the above calculations
2) a 60% drop in Irish Land & Development property as per CSO doc
3) a 50% drop in Irish Commercial property as per CSO doc
4) a current MV of total Irish Property security of €29.6bn (based on statement in CSO doc that “The geographical spread of the property associated with the loan assets is: Ireland: 67%…”)
THEN we can deduce that
(I) ratio of Irish Land & Development Loans to Irish Commercial Property Loans is approx 28%:72%.
(II) approx current MV of Irish Land & Development property is approx €7bn.
(III) Assuming an LTV of 77% from peak, the approx book value of Irish Land & Development loans being assumed is approx €13.4bn
This seems impossible to square with the overall ratio of land: devt: commercial loans of 36:28:36 !!!!
It is also impossible to square with the fact that the total Irish Land & Development loans disclosed in the supplementary documentation on 16 Sept came to €37.2bn.
Can anyone else make the figures stack up?
I have posted in the wrong thread – the above should all be in the Eurostat thread – rats.
Reall thorough amendments Joan Burton 8th and 9th lists of proposed amendments of NAMA Bill.
There are so mani angles to NAMA.
Part of me is just incredulous a group of people could conjure NAMA of so much complexiti up so quickli.
@ Stephen D
“Part of me is just incredulous a group of people could conjure NAMA of so much complexiti up so quickli.”
To mix meatphors.
Its their bread and butter, the sharks smell blood.
@ zhou
“The letter from the CSO to Eurostat states:
“NAMA purchase price (LTEV) NAMA est. [(1) x 70%] 54″
This suggests that LTEV was based on a discount from book value rather
than on MV of property values or indeed MV of loan assets.”
The banks have already provided for €7 of losses.
So the real figure is €70.
The NAMA value is based on the “notional” or “contract” value of the loans not the book value.
So the “estimate” of LTEV includes €7 already provided for as unrecoverable by the banks themselves.
Funny how that €7 is close to the €9 of “rolled-up” interest.
What happens when you add in the €5 of interest that NAMA intends rolling-up in the first three years of operation?
What happens LTEV?
It becomes a complete fiction.
@ zhou,
“so arbitrary suggests that the DoF are enforcing a “haricut” based on book value rather than some other measure of the MV of the loans or the MV of the property”
I don’t think its arbitrary zhou, unless you mean “they” worked out the figure on the basis of how much pain the banks could take or how much the ECB would let “them” away with.
Even if that is the case the figures are a disaster, the banks will need massive recap.
@ zhou
“I point this out as another example of shoddy document preparation on the part of the DoF. It really annoys me and it is certainly not tolerated where I work.”
Shoddy? It’s worse.
No offence, Where you work is not my concern.
These shoddy sums affect the future of the country I live in.
They are incompetent and, hard to believe, rushed.
I expect the €7bn provision for losses made by the banks relates to the entire portfolio not just the parts being transferred to NAMA (i.e., greater than €5m). Much of it will be absorbed by losses in the non-NAMA portfolio. One of the reasons I tried to calculate the Irish L&D loan values was to ascertain how many of these loans are being left on the banks’ books.
@ zhou,
You could be right. But I don’t think so.
Why would the NAMA business plan include this?
“Over the past year, institutions likely to participate in NAMA have made
provisions of €7.3 billion against loan impairments:”
Is that supposed to include credit card & motor loan losses?
If it is, does the business plan not look more ridiculous than it already is?
“They” have included any possible write-down of loans to make the figure “look” better.
Why didn’t “they” just give the write-down for the NAMA bit.
It only makes it worse zhou.
By accepting NAMA, and proposing amendments does that, the whole intellectual point of opposing it is lost.
It is now allowed that the executive can accept some amendment and thereby bind the proposer of it to the Bill.
Wonderful job! I hope you all enjoy the NAMA experience! One thing is for sure, there will be no lack of commentary opportunities for the future.
@Pat Donnelly
I understand where you are coming from but the opposition have to do their best to improve Lenihan’s dog’s dinner, while trying to stop him making us eat it.
Yet another distorting effect of Nama is that even critics like myself want it off balance sheet, in the balance sheet equivalent of outer space. Also, once it goes through, publishing property market data should be made a capital offence. Alternatively, it should be made illegal to buy property at less than the LTEV, with any premium tax deductible. I think I prefer the latter, it’s more elegant. Downward reviews of rents should be legislatively prohibited. Maybe I should give a list of these to the minister. They’re the sort of amendments he will accept. To be fair to him, once 58% of the peak market value is paid he will probably be willing to accept any amendment.
And once Nama is passed we will all be Nama supporters, we will all want the property market rigged. Think 1984. Oceania is at war with Eastasia. It has always been at war with Eastasia.
zhou_enlai Says on October 20th, 2009 at 7:18 pm
“I would also point out that there is an error in the CSO document at page 2 where it says:
“(8) Current market value of properties [(3)x [100%-(7)]] 47″
The reference to “(3)” is an error and should refer to “(5)”.
I point this out as another example of shoddy document preparation on
the part of the DoF. It really annoys me and it is certainly not tolerated where I work.”
OUCH!
zhou_enlai then does his sums
“This tells us that the MV of foreign property is €15.5bn based on total MV of €47bn (33% of €47bn = €15.5bn).
It also tells us that the total MV of Irish property is €29.6bn based on total MV of €47bn (67% of €47bn = €29.6bn).”
€15.5bn + €29.6bn = €45.1bn. Zhou_enlai started with €47bn so what happened to the other €1.9bn?
What did the Good Lord say about the first stone?
@Pat Donnelly
After listening to Peter Mathews I’ve changed my mind.
He believes we will probably lose €17.81 Billion excluding administration costs and also I believe net interest costs. We may lose up to €27.72 Billion plus admin and net interest.
And the banks will still not be recapitalised.
He says this has to be stopped and I agree.
It isn’t capitalism. It’s pure crony capitalism.
34 replies on “Proposed NAMA Amendments”
The compiled list of all 9 White lists so far is also available here.
http://www.oireachtas.ie/documents/bills28/bills/2009/6009/D6009D-DCN.pdf
Please note this is subject to additional lists being issued if new amendments are approved.
There is alot of reading there!!
Fair play to Joan Burton
But on the eight list
“(5) It shall be an obligation of a participating institution to publish the names of
all developers and associated companies whose loans have been acquired by
NAMA, including specification as to whether these loans are performing, have been
in any way restructured, or in default.”.
—Joan Burton
Not being an expert in this, but surely the banks can tidy up all this to suit themselves before reporting month bu month developments???
Probably in there somewhere…
I mentioned a few weeks ago the possiblity of an ammendment that limits the minister of finance from ‘certain’ actions from the date of a fall of a government/calling of an election.
Al
35.—NAMA shall prepare, publish and submit to Dáil Éireann for consideration,
a business plan including a Corporate Operational Plan on an annual basis,
including an overview of the outlook for interest rates and evolution of yield
curves.”.
If not why not.
Quick scan,
The powers of the “Minister” are substituted by an “Oireachtas Committee on NAMA”. Correct?
And if not why not.
Of course the Act can be amended at a later date.
This will be a test of Brian Lenihan. My guess is that he will rule out as many of the opposition’s motions as he can on the following grounds:
– poorly drafted.
– already covered in the existing bill’s provisions.
– possibly unconstitutional.
– will legislate for at a future date if necessary.
– Good. But his legal advisers will have to look into it.
– Will accept. But wants to amend just a teeny weeny bit.
On the other hand, with judges talking about 80% price falls, and him wanting to pay 58% of peak value, he may make lots of legislative concessions to get Nama through.
If he, however misguidedly, believes that Nama will succeed, and if this is an honest process, he will accept all the opposition’s amendments.
If he won’t accept the opposition’s amendments…..
Is it really sensible for Fine Gale (Richard Bruton, Kieran O’Donnell) to attempt to create a “National Recovery Bank” by amendment?
They and everyone else knows that this is going nowhere in the current environment.
❓
SECTION 66
“(5) It shall be an obligation of a participating institution to increase lending to
SMEs and first time buyers to such an extent as is specified in agreements made by
the participating institutions with the Minister whether before or after the passing of
the Act and in the absence of such agreement, to the extent specified by the
Minister.
No mention of the risks of such lending.
The banks would asks the such “additional” lending be underwritten by the State
After all they are already lending to creditworthy borrowers.
What criteria would apply to “first time buyers”. 100% LTV.
What protection would first time buyers have if the market falls another 20% – 30%.
This may look good but it could trap even more people in debt.
“(5) It shall be an obligation of a participating institution to enter into a
Memorandum of Understanding with the Minister ensuring that they will not sell
NAMA bonds on the open or secondary debt markets.”.
Indeed.
Can’t have NAMA issuing bonds at par only for them to be picked up at 60c in a few years and then presented for repayment at par on maturity.
Still, nobody knows how these bonds will be structured.
“(5) It shall be an obligation of a participating institution to publish the names of
all developers and associated companies whose loans have been acquired by
NAMA, including specification as to whether these loans are performing, have been
in any way restructured, or in default.”.
And if not why not.
(a) the long-term economic value determined by NAMA for a parcel of land
shall not exceed the market value of the parcel by more than such
fraction as the Minister may determine by regulations for the purposes of
this paragraph,
—An tAire Airgeadais.
The Minister intends overpaying for Land.
❓ 🙄
An aside – on the subordinated loans, NAMA will only pay out if NAMA makes a profit. Surely this mitigates against the effectiveness of the subordinated bonds as an incentive to the banks to work out the loans properly. If Anglo or AIB blows the €2.7bn then what is the incentive for BoI to work out its loans properly????
@zhou
Even those parts of Nama which are not, per Stiglitz, criminal, will probably be bungled by the failed technocracy. I would expect that on top of everything else that is wrong with Nama the senior bureaucracy will make a lot of gigantic – but entirely innocent – howlers. They could have brought in outside help from Sweden but they, and the politicians, are far too arrogant and parochial to do this. You may remember how when Sir Humphrey of “Yes Minister” started in the civil service he was put in charge of legal negotiations relating to a site. “Of course I had no legal training whatsoever”. Years later his hugely costly error was discovered. Jim Hacker graciously forgave a for once panicing Sir Humphrey.
Years later we too will draw a simple lesson:
Governments should not make €59 Billion investments in the property market, and overpay, and on flexible interest rates…
It will be far too late.
lots of politics in there, pity our government doesn’t have more people who came from the business community in it. monthly reports etc. will ensure that the admin costs go through the roof if accepted. allowing lease breakage due to the landlord being in NAMA is kind of counter purpose, it will make it harder for the developer in question to service their loans! think i’ll get cryogenically frozen and come back in 2025, should all be sorted by then.
Still no post on this “private” Nama – the ARC. The rationale behind a Government bailout is obvious enough but what on earth can private individuals hope to gain by a similar venture. I have an uneasy feeling that somehow this is tied in with Nama – and probably to our cost – but maybe some experts in here will cast light on what might be afoot.
To paraphrase Boyle Roche -I smell a rat; I see him forming in the air and darkening the sky; but can we nip him in the bud?
@ Aidan
I don’t see anything too suspicious about ARC. But if it’s a private firm, then it’s not a bailout. Unlike NAMA, presumably they’ll look to pay as low a price as possible. I’ve read some silly stuff about this along the lines of “it’s good news that anyone can think they’d make a profit out of Irish property” but the truth is that you can make a profit out of anything if you buy it for a low enough price.
@ zhou
“An aside – on the subordinated loans, NAMA will only pay out if NAMA makes a profit. Surely this mitigates against the effectiveness of the subordinated bonds as an incentive to the banks to work out the loans properly. If Anglo or AIB blows the €2.7bn then what is the incentive for BoI to work out its loans properly????”
I mentioned this before Zhou.
If losses are pooled (not segregated) Anglo will gobble up the lot.
AIB & BOI will end up subsidising the Anglo bailout.
That out to help get credit flowing.
@ Aidan
“Still no post on this “private” Nama – the ARC. The rationale behind a Government bailout is obvious enough but what on earth can private individuals hope to gain by a similar venture.”
1 ARC will not be forcing anyone to sells loans to them. Both sides to a transaction will agree a value for loans transferred.
2 ARC will off an equity stake to those selling loans.
3 ARC will raise equity & debt in the market.
4 ARC will, presumably, run a tight ship (no €2.6Bn of fees or like proportion)
5 ARC and its investors believe it can make a profit.
6 ARC will not be paying over “market” value.
7 ARC’s market value will likely be considerably less than NAMA’s “market” value, and that’s ignoring LTEV.
In short if we were being offered ARC rather than NAMA I’d be happy.
Sure the banks would need recap. But that’s a different matter.
Bye the bye the ARC risk sharing seems to me to be quite close to Honohan’s idea.
I’m not an expert.
@Karl
Thanks .. probably just my paranoia acting up.. I had the impression though that Nama only made sense to the banks if the loans were overpaid?
@ Eamonn76
“Even those parts of Nama which are not, per Stiglitz, criminal, will probably be bungled by the failed technocracy.”
Maybe we could have a whip round and hire Stiglitz.
😀
@Greg – thank you also – comments crossed – sorry for dragging this thread off topic there
I have focussed on the CSO document which is a smarter version of the
additional info provided on 16 Sept.
We are a step futher on in relation to how the estimated LTEV of loans
was calculated.
The letter from the CSO to Eurostat states:
“NAMA purchase price (LTEV) NAMA est. [(1) x 70%] 54”
This suggests that LTEV was based on a discount from book value rather
than on MV of property values or indeed MV of loan assets.
The fact that the route by which th LTEV of loans was arrived at in the
estimates is so arbitrary suggests that the DoF are enforcing a
“haricut” based on book value rather than some other measure of the MV
of the loans or the MV of the property. Again, the MV of loan assets
is neither estimated nor discussed.
The “premium” being the difference between MV of loan assets and LTEV of
loan assets is not disclosed or discussed.
We are told that the LTEV of loans is an estimate but one could
(questionably) infer that the only variable in the LTEV of loans is the
book value of theloans to be transferred. However it is also possible
that the 70% is a variable. However, there is no clarity on this
point.
I would also point out that there is an error in the CSO document at
page 2 where it says:
“(8) Current market value of properties [(3)x [100%-(7)]] 47”
The reference to “(3)” is an error and should refer to “(5)”.
I point this out as another example of shoddy document preparation on
the part of the DoF. It really annoys me and it is certainly not
tolerated where I work.
***************************************************************
We know that the ratio of land:devt:commercial loans is 36:28:36.
“36% of the loan assets will be backed by land and 28% by development
property. The remaining 36% consists of associated commercial loans.”
We also know that foreign loans make up 33% of the land securing the
loans:
“The geographical spread of the property associated with the loan assets
is: Ireland: 67%, Northern Ireland: 6%, rest of UK: 21%, USA: 3%, Other:
4%”.
(However, we are not told whether this is 33% of current land MV
or 33% of peak MV of all land or 33% of loan book value [or 33% of acreage 🙂 ].)
The most logical assumption is that the 33% refers to current MV.
This tells us that the MV of foreign property is €15.5bn based on total
MV of €47bn (33% of €47bn = €15.5bn).
It also tells us that the total MV of Irish property is €29.6bn based on
total MV of €47bn (67% of €47bn = €29.6bn).
We also know that foreign property is assumed to have dropped by 40%
from peak.
This gives us a maximum peak value for foreign property of €25.85bn.
This tells us that the minimum peak value of Irish property is €62.15bn.
Assuming:
1) a peak value of €62.15bn for Irish property based on the above
calculations
2) a 60% drop in Irish Land & Development property as per CSO doc
3) a 50% drop in Irish Commercial property as per CSO doc
4) a current MV of total Irish Property security of €29.6bn (based on statement in CSO doc that “The geographical spread of the property associated with the loan assets is: Ireland: 67%…”)
THEN we can deduce that
(I) ratio of Irish Land & Development Loans to Irish Commercial Property Loans is approx 28%:72%.
(II) approx current MV of Irish Land & Development property is approx €7bn.
(III) Assuming an LTV of 77% from peak, the approx book value of Irish Land & Development loans being assumed is approx €13.4bn
This seems impossible to square with the overall ratio of land: devt: commercial loans of 36:28:36 !!!!
It is also impossible to square with the fact that the total Irish Land & Development loans disclosed in the supplementary documentation on 16 Sept came to €37.2bn.
Can anyone else make the figures stack up? I am Alan Shattered at this stage.
APOLOGIES – TIDIED UP VERSION AS FOLLOWS:
I have focussed on the CSO document which is a smarter version of the additional info provided on 16 Sept.
We are a step futher on in relation to how the estimated LTEV of loans was calculated.
The letter from the CSO to Eurostat states:
“NAMA purchase price (LTEV) NAMA est. [(1) x 70%] 54”
This suggests that LTEV was based on a discount from book value rather than on MV of property values or indeed MV of loan assets.
The fact that the route by which th LTEV of loans was arrived at in the estimates is so arbitrary suggests that the DoF are enforcing a “haricut” based on book value rather than some other measure of the MV of the loans or the MV of the property. Again, the MV of loan assets is neither estimated nor discussed.
The “premium” being the difference between MV of loan assets and LTEV of loan assets is not disclosed or discussed.
We are told that the LTEV of loans is an estimate but one could (questionably) infer that the only variable in the LTEV of loans is the book value of theloans to be transferred. However it is also possible that the 70% is a variable. However, there is no clarity on this point.
I would also point out that there is an error in the CSO document at page 2 where it says:
“(8) Current market value of properties [(3)x [100%-(7)]] 47”
The reference to “(3)” is an error and should refer to “(5)”.
I point this out as another example of shoddy document preparation on the part of the DoF. It really annoys me and it is certainly not tolerated where I work.
************************************
We know that the ratio of land:devt:commercial loans is 36:28:36.
“36% of the loan assets will be backed by land and 28% by development property. The remaining 36% consists of associated commercial loans.”
We also know that foreign loans make up 33% of the land securing the loans:
“The geographical spread of the property associated with the loan assets is: Ireland: 67%, Northern Ireland: 6%, rest of UK: 21%, USA: 3%, Other: 4%”.
(However, we are not told whether this is 33% of current land MV or 33% of peak MV of all land or 33% of loan book value [or 33% of acreage 🙂 ].)
The most logical assumption is that the 33% refers to current MV.
This tells us that the MV of foreign property is €15.5bn based on total MV of €47bn (33% of €47bn = €15.5bn).
It also tells us that the total MV of Irish property is €29.6bn based on total MV of €47bn (67% of €47bn = €29.6bn).
We also know that foreign property is assumed to have dropped by 40% from peak.
This gives us a maximum peak value for foreign property of €25.85bn.
This tells us that the minimum peak value of Irish property is €62.15bn.
Assuming:
1) a peak value of €62.15bn for Irish property based on the above calculations
2) a 60% drop in Irish Land & Development property as per CSO doc
3) a 50% drop in Irish Commercial property as per CSO doc
4) a current MV of total Irish Property security of €29.6bn (based on statement in CSO doc that “The geographical spread of the property associated with the loan assets is: Ireland: 67%…”)
THEN we can deduce that
(I) ratio of Irish Land & Development Loans to Irish Commercial Property Loans is approx 28%:72%.
(II) approx current MV of Irish Land & Development property is approx €7bn.
(III) Assuming an LTV of 77% from peak, the approx book value of Irish Land & Development loans being assumed is approx €13.4bn
This seems impossible to square with the overall ratio of land: devt: commercial loans of 36:28:36 !!!!
It is also impossible to square with the fact that the total Irish Land & Development loans disclosed in the supplementary documentation on 16 Sept came to €37.2bn.
Can anyone else make the figures stack up?
I have posted in the wrong thread – the above should all be in the Eurostat thread – rats.
Reall thorough amendments Joan Burton 8th and 9th lists of proposed amendments of NAMA Bill.
There are so mani angles to NAMA.
Part of me is just incredulous a group of people could conjure NAMA of so much complexiti up so quickli.
@ Stephen D
“Part of me is just incredulous a group of people could conjure NAMA of so much complexiti up so quickli.”
To mix meatphors.
Its their bread and butter, the sharks smell blood.
@ zhou
“The letter from the CSO to Eurostat states:
“NAMA purchase price (LTEV) NAMA est. [(1) x 70%] 54″
This suggests that LTEV was based on a discount from book value rather
than on MV of property values or indeed MV of loan assets.”
The banks have already provided for €7 of losses.
So the real figure is €70.
The NAMA value is based on the “notional” or “contract” value of the loans not the book value.
So the “estimate” of LTEV includes €7 already provided for as unrecoverable by the banks themselves.
Funny how that €7 is close to the €9 of “rolled-up” interest.
What happens when you add in the €5 of interest that NAMA intends rolling-up in the first three years of operation?
What happens LTEV?
It becomes a complete fiction.
@ zhou,
“so arbitrary suggests that the DoF are enforcing a “haricut” based on book value rather than some other measure of the MV of the loans or the MV of the property”
I don’t think its arbitrary zhou, unless you mean “they” worked out the figure on the basis of how much pain the banks could take or how much the ECB would let “them” away with.
Even if that is the case the figures are a disaster, the banks will need massive recap.
@ zhou
“I point this out as another example of shoddy document preparation on the part of the DoF. It really annoys me and it is certainly not tolerated where I work.”
Shoddy? It’s worse.
No offence, Where you work is not my concern.
These shoddy sums affect the future of the country I live in.
They are incompetent and, hard to believe, rushed.
I expect the €7bn provision for losses made by the banks relates to the entire portfolio not just the parts being transferred to NAMA (i.e., greater than €5m). Much of it will be absorbed by losses in the non-NAMA portfolio. One of the reasons I tried to calculate the Irish L&D loan values was to ascertain how many of these loans are being left on the banks’ books.
@ zhou,
You could be right. But I don’t think so.
Why would the NAMA business plan include this?
“Over the past year, institutions likely to participate in NAMA have made
provisions of €7.3 billion against loan impairments:”
Is that supposed to include credit card & motor loan losses?
If it is, does the business plan not look more ridiculous than it already is?
“They” have included any possible write-down of loans to make the figure “look” better.
Why didn’t “they” just give the write-down for the NAMA bit.
It only makes it worse zhou.
By accepting NAMA, and proposing amendments does that, the whole intellectual point of opposing it is lost.
It is now allowed that the executive can accept some amendment and thereby bind the proposer of it to the Bill.
Wonderful job! I hope you all enjoy the NAMA experience! One thing is for sure, there will be no lack of commentary opportunities for the future.
@Pat Donnelly
I understand where you are coming from but the opposition have to do their best to improve Lenihan’s dog’s dinner, while trying to stop him making us eat it.
Yet another distorting effect of Nama is that even critics like myself want it off balance sheet, in the balance sheet equivalent of outer space. Also, once it goes through, publishing property market data should be made a capital offence. Alternatively, it should be made illegal to buy property at less than the LTEV, with any premium tax deductible. I think I prefer the latter, it’s more elegant. Downward reviews of rents should be legislatively prohibited. Maybe I should give a list of these to the minister. They’re the sort of amendments he will accept. To be fair to him, once 58% of the peak market value is paid he will probably be willing to accept any amendment.
And once Nama is passed we will all be Nama supporters, we will all want the property market rigged. Think 1984. Oceania is at war with Eastasia. It has always been at war with Eastasia.
zhou_enlai Says on October 20th, 2009 at 7:18 pm
“I would also point out that there is an error in the CSO document at page 2 where it says:
“(8) Current market value of properties [(3)x [100%-(7)]] 47″
The reference to “(3)” is an error and should refer to “(5)”.
I point this out as another example of shoddy document preparation on
the part of the DoF. It really annoys me and it is certainly not tolerated where I work.”
OUCH!
zhou_enlai then does his sums
“This tells us that the MV of foreign property is €15.5bn based on total MV of €47bn (33% of €47bn = €15.5bn).
It also tells us that the total MV of Irish property is €29.6bn based on total MV of €47bn (67% of €47bn = €29.6bn).”
€15.5bn + €29.6bn = €45.1bn. Zhou_enlai started with €47bn so what happened to the other €1.9bn?
What did the Good Lord say about the first stone?
@Pat Donnelly
After listening to Peter Mathews I’ve changed my mind.
He believes we will probably lose €17.81 Billion excluding administration costs and also I believe net interest costs. We may lose up to €27.72 Billion plus admin and net interest.
And the banks will still not be recapitalised.
He says this has to be stopped and I agree.
It isn’t capitalism. It’s pure crony capitalism.