Comments on: Masterfully Vague?

By: The Irish Economy » Blog Archive » New Guidelines for NAMA Pricing

The Irish Economy » Blog Archive » New Guidelines for NAMA Pricing — Tue, 09 Mar 2010 14:31:32 +0000

[...] 2.75 percent is now 5.25 percent. Prize for best answer as to what this went to Frank Galton: NAMA LTEV = LTEV*(1-Standard Discount Rate). Assuming that’s correct, then this would [...]

By: Cearbhall O'Dalaigh

Cearbhall O'Dalaigh — Fri, 25 Dec 2009 13:38:44 +0000

.
AIB says it may need more state money IN ADDITION TO NAMA

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6875081/AIB-warns-it-may-need-more-state-money-despite-bad-bank-deal.html

Our government is crazy not to pull the plug on these characters while it still can.

Have the bankers told our Minister for Finance the true extent of their debts?
Is the Minister aware of the true level of floating rate not debt?
There are some incredible figures being racked up in Anglo AFTER it was nationalised.

Other banks are also pulling in HUGE deals, even though they are bankrupt. We the taxpayers are underwriting all this paper even though we don’t have a clue what’s going on.

What about this half a billion, for example?

Official Notice
Nr: 49038
Title: AIB Allied Irish Banks, p.l.c., Dublin, Ireland
CHF 500′000′000 Floating Rate Notes 2009-2010
Valor-No.: 10542 883
ISIN: CH 010 542 883 0

In accordance with the Terms and Conditions of the Notes the
following interest fixing has taken place:

fixing date 23.12.2009
period 28.12.2009 (incl.) to 29.03.2010 (excl.)
number of days 91
day count fraction actual / 360
3-Mts.-CHF-Libor 0,25167
spread + 1,25000
new rate 1,50167 % p.a.
amount payable CHF 379.588805 per CHF 100′000 nom.
due 29.03.2010
remark Adjusted Modified Following Business Day Convention

Date: 23.12.2009
Bank: CREDIT SUISSE AG

By: Robert Browne

Robert Browne — Thu, 24 Dec 2009 12:01:45 +0000

Mr. Lenihan knows he is going to need the IMF next year that is what Mr. Seelig’s real use is, he knows the IMF ropes. The government are already running to keep up with bank losses next year they will see that they cannot run fast enough. They embarked on a suicidal strategy with NAMA against all independent advice. Wait till the flood of defaults hit the books next year making recapitalisation all but impossible.

We need solvent (foreign) banks in this country and we need them now. The governments strategy of throwing good money after bad has failed miserably and in the process burned up the NPRF. Remember Morgen Kelly’s remark that if we put money into Anglo that we may as well light a fire in Stephen’s Green with it! How right Mr. Kelly was as usual. 11bn gone another 12bn to go in, property prices still falling and business failures mounting. it will be a long time before any Irish bank makes a profit of even 1bn again.

By: EWI

EWI — Wed, 23 Dec 2009 21:51:51 +0000

The IMF’s Mr. Seelig sounds like the kind of man the Irish public should prefer to keep out, rather than invite in and put in charge of something so important.

By: Andrew McDowell

Andrew McDowell — Wed, 23 Dec 2009 21:49:46 +0000

Karl

I was told in September by a major UK property investor that he would apply a discount rate of at least 10% to projected cashflows to NAMA, given the huge underlying uncertainties attached to these projections.

Perhaps another approach to thinking about the appropriate discount rate to apply to NAMA cashflows is the change is the cost of borrowing to the Irish Government as a result of NAMA. This is the true cost of capital for NAMA. I know it’s empirically impossible to calculate this, but I think even the most reasonable observer will agree that it’s considerably higher than the actual average cost of borrowing used as the discount rate in the NAMA business plan.

Andrew

By: Garry

Garry — Wed, 23 Dec 2009 16:40:47 +0000

+1 Robert….

I haven’t been following the NAMA debate in a while…. been too busy trying to secure business for the new year; thankfully some of it will come in….

But I had heard the masterful comment and it made me think… Now its made me laugh.

It appears Mr Seelig and myself have a few things in common, that masterful comment was … masterful…

By: anon econ

anon econ — Wed, 23 Dec 2009 14:09:34 +0000

Off topic I know but Karl you did refer to desks being cleared before X-mas … I see the D/Finance is looking for a new Secretary general as a ‘vacancy will arise shortly’. Recruitment is outside TLAC and a matter for the govt. Expressions of interest to the current SG by noon on Thursday, 7 January, 2010. Any of the good contributors to this site interested ?

By: Robert Browne

Robert Browne — Wed, 23 Dec 2009 11:18:45 +0000

MR. Seelig is now much more than the best friend of the department of finance he has now been appointed by Lenihan to the Board of NAMA. All is revealed.

By: Eoin

Eoin — Wed, 23 Dec 2009 09:35:44 +0000

@ YM

NAMA “fees & expenses” are €240mn per year over 11 years (2010-2020 inclusive), so €2.64bn in total, per the business plan.

http://www.nama.ie/Publications/2009/Business_Plan_13OCT09.pdf

By: Dreaded_Estate

Dreaded_Estate — Wed, 23 Dec 2009 09:07:56 +0000

Is the 3% the discount NAMA is using to get from the property value to the loan value?

By: Maman Poulet » While you were out shopping

Maman Poulet » While you were out shopping — Wed, 23 Dec 2009 02:34:40 +0000

[...] released its regulations regarding the determination of long-term economic value for assets. Read Karl Whelan on Irish Economy for more analysis (h/t [...]

By: Dreaded_Estate

Dreaded_Estate — Tue, 22 Dec 2009 21:57:32 +0000

We still don’t have any idea how they are valuing the loans based on the underlying property values.

By: yoganmahew

yoganmahew — Tue, 22 Dec 2009 21:50:51 +0000

So, 3% of 77 bn = 2.31 bn

As I remember it, the administration costs were going to be 350 mn/year or 3.5 bn expected over ten years?

So it is either underpricing, or giving us a shorter lifespan of 6 and a half years?

By: Karl Whelan

Karl Whelan — Tue, 22 Dec 2009 21:25:23 +0000

I’m guessing Frank is right. The “standard discount rate” probably isn’t a discount rate in the sense of the earlier usage of the term in the document. What they might mean is that they will apply a three percent haircut to whatever LTEV they come up with.

By: Brian Lucey

Brian Lucey — Tue, 22 Dec 2009 21:22:06 +0000

KW
“I couldn’t figure out when this rate would be applied rather than the NAMA discount rate defined above.”
When it gives a better price (better being a variable and intangible thing”) to NAMA.
ten plus .8 or 3….. whatever. Sure its all free money from the ecb isnt it?

By: Frank Galton

Frank Galton — Tue, 22 Dec 2009 21:20:39 +0000

I think the latter 3.0 percent is just an off-the-top adjustment to whatever answer they get from LTEV. i.e. NAMA LTEV = LTEV * 0.97. The real action is in the NPV calculation.