Ronan Lyons on NAMA and Yields

Ronan has updated his analysis on property yields and its implications for NAMA and long-term economic value. It doesn’t make for comfortable reading. I wonder does Ronan understand the mystery of the standard discount rate …

77 replies on “Ronan Lyons on NAMA and Yields”

If anyone would care to produce a worked example incorporating the different yields in the context of a specific NAMA acquisition, holding and disposal/repayment I for one would be very interested and grateful.

@KW; Ronan Lyons

Thanks Ronan.

“… we just don’t know what’s in about €64bn of the original €88bn.” + Judge Peter Kelly’s observations: FRIGHTENING! This is one massive un-known …….. yet we are expected to take it on ‘blind faith’ on behalf of every citizen and with a probable risk of losing an entire generation. What rational (whatever your slant) investor would not laugh such a proposition out of hand, if not out of court?

“Surely we as the shareholders in NAMA deserve a better prospectus than this?” Quite!

“If NAMA could show that it’s aware of these very basic facts about Ireland’s property market before it starts taking over any loans, I would be a lot less worried about giving it access to tens of billions of euro worth of current and future taxpayers’ earnings. If it doesn’t, the elephant is very much still in the room. If it does, and taxpayers pay a fair price, cash-starved banks will mean a new elephant will take its place – nationalisation.”

Following on from previous thread on LTEV – I’m practically speechless.

We really do need to reverse the sequencing of these two elephants – and cull one of them: we cannot afford both, and as things stand we end up with both, and both are growing bigger by the day.

25 seconds to melt_down

@Ronan Lyons

You say that NAMA needs to get the trough correct. As things get worse the trough may be pushed out in time and pushed down in severity. However, it appears NAMA will not be able to take account of this unless the Minister says so. This is because NAMA is stuck having to act on 2009 forecasts.

Furthermore, the untrustworthy yields on dublin commercial (which are higher than they should be because rents are sticky and are not falling as quickly as freehold values) are copperfastened into the equation to suggest that the property is undervalued by freezing the yield as of the date of valuation. AFAIK the “date of valuation” can be set at a moment in time at NAMA’s discretion and does not have to be the actual date the loan is acquired.

It is my view that rents are sticky because valuers operate rent reviews to favour an upwards only trend whether or not it is required and because landlords have not yet been liquidated due to zombification. It is also not clear whether banks are willing to consent to lettings at lower rents even if indebted landlords want to grant them.

From the latest statutory instrument:

“5. (1) The adjustment factor for land located in the State shall be derived by NAMA in accordance with these Regulations in such manner as it thinks fit, by reference to such of the following as it considers relevant:

(a) the difference, as determined by NAMA, between—
(i) the prices or yields of land located in the State on the valuation date, and
(ii) the prices or yields of land located in the State over the relevant period as determined by reference to such of the bulletins and indices specified in Schedule 1 and such other similar relevant bulletins and indices as NAMA may consider appropriate in the circumstances;
(c) projections of land prices, demographic variables, interest rates, other relevant variables and the State’s gross domestic product referable to any period or periods that end on a day or days not later than 7 years after the valuation date, which are made by the bodies mentioned in paragraph (2) and which were made available to NAMA on or after 21 December 2009 but not later than 10 January 2010; and
(2) In determining the correlation for the purposes of paragraph (1)(b), NAMA shall have regard to such of the data and analyses as it considers appropriate and which were available to NAMA on or after 21 December 2009 but not later than 10 January 2010, and as are prepared by any or all of the following:
(a) Central Statistics Office;
(b) Economic and Social Research Institute; and
(c) Central Bank and Financial Services Authority of Ireland.”


Looks like these Regs (5.1) are drafted in such a broad and generalist manner that ‘NAMA’ can literally, and legally, write its own interpretation; one could drive a herd of elephants through here and difficult to see how the size of the herd, let alone a single elephant, could be challenged.

….. this has to be UNCONSTITUTIONAL. How does one get this onto the desks of The IRISH SUPREME COURT – even from the generalist standpoint of the ‘public good’ and/or the ‘public interest’ – or both. HELP!

@David O’Donnell
In early Oct James Nix, a GP opponent of NAMA, wrote here about the official cover up of details relating to the NAMA loans:
NAMA/Official Irish banking policy was a cover up (over three years now since early 2007), is a cover up and will continue to be a cover up. Official Ireland is pathalogically secretive and massively exploits the public. We need a referendum on Anglo/Nationwide. Not another cent into this bank to protect the fortunes and reputations of FF/PDs/MegaDevelopers/Bankers/Bank Investors/Senior Public Service.
Rescuing Anglo/Nationwide and covering up the massive costs of doing so and the reckless behaviour they engaged in was, is and will always be the key objective of NAMA/Offical Irish banking policy. When you have covered up a massive system of child abuse and exploitation by allied institutions for 40 YEARS after it ended, covering up a bank collapse caused by your own recklessness and greed is actually a lesser sin.

“Getting credit flowing” and “repairing the banking system” were simply massive official deceptions. And given what official Ireland have done to children and the ill (eg., the haemophiliacs and the Tallaght X Rays) this is one of their lesser and less wicked cover ups. That they are still haggling over compensation to victims of the Magdalene laundries while giving tens of billions to the banks – and millions to the bankers who ruined them – shows how evil FF/PDs/Establishment are. Someone in the Dept of Finance
should stop acting like Opus Dei and blow the lid on the most costly – but not the worst – cover up the Irish establishment have ever engaged in.

S.I. No. 88 of 2010 is a deliberate exercise in obfuscation.

It serves two purposes.

1. No sensible debate can take place in the Dáil or in the public media.

2. It provides cover for those involved in the case of future legal action or inquiry/tribunal.

That’s all it is. It is nothing else.

NAMA/Official Irish banking policy has always been, is and always will be a massive coverup and massive transfer of wealth to elites. “Getting credit flowing” and “repairing the banking system” were officially fabricated cover stories to assist the cover up. The key objective of NAMA/Official Irish banking policy: rescuing Anglo/Nationwide and covering up the massive costs of doing so and the reckless behaviour they engaged in.
S.I. No. 88 is therefore intended to enable the cover up of the cover up. That’s how warped our establishment are.


The Supreme Court would have to think twice about scuppering the main parts of this act after all the committee debates, all the dail debates, the long consultation period and a vote of the Oireachtas. It is not unusual phenomenon for Ministers to be delegated extraordinary powers in times of emergency. Garrett Simons SC may fee it offends against the principles and policies doctrine but I think a Court would be slow to support him. In any event, a further act copperfastening the SIs could and would be passed if necessary. Even opponents of NAMA would probably do that if in power in the future in order to preserve stability.


I see your point – but I believe a challenge is necessary – as noted above – it is drafted in a manner that essentially provides carte-blanche to those who implement it, those who benefit from it, and possible redress for those who have to pay for it [citizens] is excluded ab initio through having the doors closed via usage of incredibly generalist procedural justifications (as noted – one can drive a herd of elephants through here, and I’m not a lawer and can see that) – NAMA could sell off the entire island here, at any price it chooses, and there is no way back. Does Garrett Simons blog? Judge_Dread is still available – and boy do we need a Judge Dread at the moment. I’ve read your outline of cute-heuristic LTEV, seen Ronan L’s size of unknows, and now this open-ended legalise ……….. we gotta go Supreme Court somehow – Joe and Joan Citizen have no idea of what is in store for them – serf-hood is a close enough description right now – the credibility of the state is at stake here.

The Opposition in this country are not short of legal qualifications. Given the shouting and booing at the progress of NAMA, surely our Opposition have the means, motive and opportunity to seek clarity?

“In any event, a further act copperfastening the SIs could and would be passed if necessary. Even opponents of NAMA would probably do that if in power in the future in order to preserve stability.”
Judging by Ireland’s previous experience future governments will be sucked in to the cover up and will actively enforce it. They will justify this by referring to canon legal and canon public service advice they have received about massive canon lawsuits from the megadevelopers etc. The mega developers and bank investors will therefore have bullyed future governments into remaining silent even about the massive costs they have caused us. Future governments will end up covering up the cover up their FF/PD/GP/Ind predecessors carried out.

Or the new government can strike down the canon law system once and for all. They should amend the constitution to pass retrospective legislation:

1. to indemnify the country against all claims by megadevelopers and bank investors.

2. to criminalise all TDs and public servants who took part in the NAMA/Irish banks cover up.

This time the new government has to refuse to join the cover up and has to jail all those who participated in it. It’s the only way to break the terrible cycle of maggoty morality that is devouring the country.

@ Jagdip Singh

“… surely our Opposition have the means, motive and opportunity to seek clarity?”

They do but they don’t want to.

They will leave everything in place when elected.

It’s the Fianna Fail & Green Party job to put the wealth transfer mechanism in place.

It’s the Fine Gale & Labour job to say there is nothing they can do about and proceed with the wealth transfer.

It’s called Democracy.

@ David O’Donnell & Oliver Vandt

There will be no Supreme Court action. There will be no amendment to the Constitution prospective, retrospective or otherwise.

We have only a few weeks from now to find out what the Cowen/Lenihan “big bang” entails.

I don’t expect the public to be on the streets. The Unions won’t lead. The Opposition won’t lead. The Church won’t lead (though it has lost moral authority).

The way I see it is this. If Fine Gale and Labour (with Sine Fein, why exclude them) were to call a day of National protest (mid-week, Dail sitting) and demand a general election they could expect 500,000 + people. They don’t want to do it. They want the status quo to continue. They will execute the wealth transfer. It is their job.

The level of damages, plus legal costs of cases, relative to the income of the country, was very high in recent decades. This exaccerbated the inherent secretiveness, contempt for ordinary people and desire to preserve face of our government. I fear that, as you predict, when the NAMA lobby threaten the new government with their canon lawyers, the new government will surrender and turn on the outsiders in the population, especially the most vulnerable, as their predecessors have always done. Lenihan’s most recent budget was the embodiment of the establishment’s behaviour in the last 88 years.

€14Bn already put into Anglo, the bank of property speculators? €10 Bn of which David McWilliams identified that they deliberately tried to conceal? An official investigation into Anglo that is going BACKWARDS for “internal” reasons?

The opposition must demand a referendum on any further monies to Anglo/Nationwide and if they don’t get it Enda Kenny must lead a National Day of Protest to demand a General Election.

Following on from Ronan’s post on yields, can anyone offer guidance as to how NAMA would deal with the following scenario (any resemblance to an actual transaction is purely co-incidental and any reference to an actual transaction is accidental).

I am an SPV formed purely to acquire a retail building in central Dublin. I paid €88m in 2006 and obtained a loan from one of the 5 NAMA banks of a 77% LTV so €68bn. I haven’t repaid any of the principal and the outstanding interest sits at €9m. I didn’t give any personal guarantees to the bank and there is no cross liability with any of my other group companies. I am almost certainly going to default. The building is presently rented to a large retailer who pays €2m rent per year on a 10-year lease that presently provides for upward only annual reviews.

Anyone care to have a stab as to how NAMA would value this (actual value, LTEV, LTEV payable) and how NAMA would manage and liquidate it?

@ Jagdip Singh

I could do but I won’t. Its a secret.

You could go to the expense of an FOI request but I wouldn’t recommend it. Your not entitled to the information.

But just this once I’ll help you out.

The answer is X.

Fair enough Greg and we can all have a wry smile at it all. The govt might say this is a complex process and to trust them and the no-doubt competent people at NAMA – would we expect to be given the exact economics on a nuclear power station for example? – however because all of this is caused by the experts taking their eye off the ball and in all likelihood not understanding exotic financial instruments like CDOs and the like, we are left in the position similar to patients diagnosed with a rare and new disease and where we have an amateur’s knowlegde not too different in scope to the experts’. And on that note, if there is any one out there that could give the retail scenario above a go, I’d be grateful. And a goodnight from me.

Invitation to a blog: from Joe and Joan Citizen

Judges of the Supreme Court
The Hon. Mr. Justice John L. Murray, Chief Justice
The Hon. Mrs. Justice Susan Denham
The Hon. Mr. Justice Adrian Hardiman
The Hon. Mr. Justice Hugh Geoghegan
The Hon. Mr. Justice Nial Fennelly
The Hon. Mrs. Justice Fidelma Macken
The Hon. Mr. Justice Joseph Finnegan
The Hon. Mr. Justice Donal O’Donnell

Joan Citizen & Joe Citizen, March 11, 2010

It’s a fair question you ask. Ultimately, IMHO at any rate, it comes down to rental income. €2m is the current rent achieved, negotiated during the boom. A 6% yield (as per NAMA documentation) would suggest the building is worth €2m/0.06, i.e. €33m. (Remember, according to NAMA documentation, yields are actually higher in the Dublin market at the moment – if they were 7%, this property would be only worth €28.5m.

So already we’re 62% below the peak price. However, I don’t think that was the point of your exercise. I think the point was more in relation to uncertainty about current versus future rental income.

If I’ve understood you correctly, let’s say, then, that the owner paid just €35m for it (there or thereabouts) but the uncertainty is about future rental income. Is €2m the rent it would achieve if put on the market now? Probably not, it might get much closer to €1.25m in rent.

So then one has to look at the net present value of future rental income, the €2m from 2010-2016 until the lease runs out, and then – for want of a better phrase – the least unlikely rent in 2016, which is probably, in present euro terms, €1.25m (or whatever you think the current market rent is). [The rent will probably drift up over time, but I know of few property market commentators expecting growth in rents to be in excess of inflation – i.e. NAMA’s discount factor (Karl, let me have a look at that and see if I can speculate as to what’s going on). This is due to severe boom-time oversupply of all forms of property.]

Then, in reality, the LTEV is the net present value of the rent of the property if it went on the market now (not the rent it currently gets), with the current excess rent factoring in purely as a one-off (or more accurately once-off-for six years) addition.

A commercial property bringing in €1.25m a year should be going on the market for about €21m. The €3.75m excess in 2010-2016 rents would be added to this, but not entirely, as the prospective purchaser would have to factor in the current tenant going bust and some of the excess rents disappearing. If the probability of such an event over is about 0.1 (for a high-profile retailer), then (based on the assumptions above)…

The LTEV value of your €88m property is €24.2m.
(All errors, comments and questions on that valuation welcome.)

Thanks Ronan, so an LTEV of €24.2m. Would the LTEV payable be €24.2 divided by (1 + 6.16% SDR – assume an 8 year holding + 5.25% due diligence and financing = 1.1141) = €21.72m?

For others who might be like me, you seem to have obtained the €21m from dividing €1.25m annual base rent by 6% yield and then adding the excess rent of €0.75m per year for 5 years (why not 7 – 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017?) and discounting that total of €3.75m by 10% (the percentage probability of the current tenant going bust) though that would give you €3.3m and not €3.2m. Sorry the arithmetic result doesn’t matter but I’d just like to ensure I have the mechanics straight.

Lastly you indicated on another post that the yield of just below 6% is implied from NAMA but do you know what the average IPD yield for Dublin retail was for the NAMA “relevant period” (isn’t that 1985 – 2005?).

Again many many thanks.

Judges are obliged not to participate in public life as Chow and Lie knows well.

Any that blog will be disqualified from any hearing on anything in their blog! And quite right too.

I previously pointed out the difficulties in challenging proposed NAMA and now that it is law there are more obstacles as Chow and lie has said. Also who can sue? Lcus standi?

Anyway the EU will save Paddy from his own government.

This is hysterical, in so many ways! Learn to laugh, it is only money!


On the first point, I’m not sure – everyone seems to be a little confused about that. I’ve tried to set off against each other inflation and discounting, so I’m not sure I’d want to further reduce the LTEV, but when I get the chance, I’ll read through this new (and old) discount rate and see what’s what.

On the second point, you’re right – I think the difference comes from the two roundings, i.e. on yield and on excess rents. I added six years, as I assumed some sort of mid-year transfer and mid year-initial lease signing in 2006, which would mean rents are negotiated again in mid-2016, six years on from mid-2010.

On the third point, page 15 of tells me that NAMA is going to define the relevant average as 4.85%. That would value a property earning €1.25m at €25.8m, which – together with likely excess rents until 2016 – would give a value of just under €30m.

The 6% is a pretty round ballpark number I am using based on this document for all types of property including residential which doesn’t get a look in in the NAMA calculations above, despite being a greater part of the loan book than all three types of commercial put together!

Would it not be a more accurate measurement of the market and of a particular property to only count the yield on the day of letting? In that regard, shouldn’s only new lettings be used in determining “the yield” on property to be referenced in any LTEV formula?

@ zhou_enlai

I think the idea is to use historic data “smooth” the effect of up or down spikes in yield.

However, as every retail investor knows ….

Past Performance is No Guarantee of Future Results


Would what you’re suggesting be more akin to determining the existing value, rather than the LTEV? Also I would wonder how sustainable retail rentals are at the moment in the State. I was in London last weekend and took a wander up Bond Street (widely cited as London’s equivalent of Grafton Street). You can see my observations and 70-odd photos here,

but in summary given Grafton Street’s Zone A rental of €727 psf and the RECORD on Bond Street is €1000 psf and if you compare the two streets in terms of quality of outlet and also visible from the photographs the large number of people with shopping bags (indicating real shoppers, not just window shoppers as the UK is technically out of recesssion and London is a world class shopping destination) and the very low retail vacancy rate, then you would wonder if Grafton Street Zone A rental is sustainable at its current level.

@ Ronal L

“On the first point, I’m not sure – everyone seems to be a little confused about that. I’ve tried to set off against each other inflation and discounting, so I’m not sure I’d want to further reduce the LTEV, but when I get the chance, I’ll read through this new (and old) discount rate and see what’s what.”

The language does anything but clarify. I wonder does this help establish the logic? Reading the EU document – “Communication from the Commission on the treatment of impaired assets in the Community banking sector” Annex IV gets into valuation and pricing principles and processes. In the last 2 paragraphs of p 20 of the document it is stated – pricing of asset relief must include remuneration for the state, and in the final paragraph such remuneration may be provided by setting the transfer price of assets at below the ‘real economic value’ (l.t.e.v.). Inherently I think that this is what the standard discount rate is doing across the board on all loans that will be transferred – driven by the EU? It is quite a high ‘charge’ by NAMA.

SDR is “quite a high charge by Nama”

Posted in another thread but no response: I’m totally confused about the discount rates. Are these annual or multiyear (as used in reply to Jagdip)? Excluding the 1.7% risk margin, the rates for 3, 5 and 8 years are 2.84%, 3.87% and 4.46% respectively. If multiyear, then the 8-year rate is less than double the 3-year rate! Also, the rates look extraordinarily low bearing in mind all the risk.

@ Brian

Copied from where I answered on the other thread


I assume that they are annual discount rates and that they expect the base interest rates to rise – these are straight from the published Legislation (SI)


Thanks, What confunsed me was “Land value now 600 x 103K = €61.7M i.e. long term economic value. This is then discounted at 6.16% (risk and funding cost over 8 years) + 5% enforcement + 0.25% due diligence = 11.41% i.e. €61.7 / (1+0.1141) = €55.4 M”

This seems to apply a discount to only one year.

@ Barry T,

I don’t think the standard discount rate has anything to do with remuneration.

It seems an effort to recover costs.

This begs the question of how it should be used in a DCF calculation.

I think it is a “once off” reduction either before or after DCF is applied to the calculated LTEV.


79. Regulations in relation to determination of values.

(2) In making regulations for the purposes of subsection (1), ….. etc etc

(b) with reference to the long-term economic value of bank assets

(vi) the specification , for the purposes of attribution and application across all bank assets, or all bank assets of a particular class, of a standard discount rate, to be attributed to or applied in the calculation of each bank asset , or each bank asset of the particular class, as the case may be, acquired by NAMA, which in the opinion of the Minister is necessary or appropriate to provide for enforcement costs, due diligence costs and other relevant costs incurred or likely to be incurred by NAMA over its lifetime in the discharge of its functions”


Thanks again though to clarify “On the third point, page 15 of tells me that NAMA is going to define the relevant average as 4.85%.” The relevant period for calculating the yields has now been defined, has it not, by section 2(1) of the LTEV regs which says that the relevant period is between 1.1.85 and 31.12.2005 and accordingly the simple average would be 4.94%, not 4.85% though the impact is quite small for retail.

CORRECTION – The simple average retail yield between 1.1.85 and 31.12.2005 is co-incidentally 4.85% (incredibly the same as the simple average for 1.1.83 to Aug 2009).


‘… which in opinion of the Minister is necessary or appropriate … ‘ [79 (2) vi

So the legal foundation/justification to be challenged by Joe and Joan Citizen, who are fully entitled to state their case as citizens of a republic to all members of the Irish Supreme Court, relates to the ‘OPINION of the Minister’! Any claim to scientific validity here – I could represent Joe and Joan myself, as a mere citizen of this republic I am qualified – can, and morally should, be rejected. All power is vested in the Minister – this is dictatorship – not democracy: a state of national emergency not declared at the time this was written; all members of the Oireachtas in an apparent state of mental reservation. This is UNCONSTITUTIONAL; this is UNDEMOCRATIC; this is cute-heuristic grand larceny on a scale that is being hidden from the Irish citizenry. Was it for this the Wild Geese fled? Was it for this the brave citizens fought and died? They fled, came back, fought, and died for a republic and a democracy based on the will of the people – not for the present SERF-DOM subject to the whims or opinions of a KLEPTOCRACY. Time to revisit the Ides of March for this KLEPTOCRACY – 20 seconds to melt_down. David Citizen.

To the extent that we can take the SCS-IPD Index at face value, capital values of investment properties were down from peak by 55.6% as of December 2009. (Calculated by compounding fall of 28.9% in 2009 and 37.5% in 2008 – see Irish Times, 27 Jan 2010.) The fall in Q4 09 was 4.9%, so it doesn’t look like the slide in capital values was quite finished at that point.

@ David O’Donnell

“20 seconds to melt_down”

Take a deep breath or you’ll miss all the fun when the Cowen/Lenihan big bang is announced.

Nice of Alan Dukes to let us know that Anglo will be split into a good bank / bad bank. That would be after NAMA has taken on €30bn of loans.

Alan thinks we’ll make loads of money on floating the good bank at some indeterminate future date.

Gee, thanks Alan.

Poster Hammer on another forum:
“A 52-acre residential site in Shankill, Co Dublin, owned by developer Joe O’Reilly and a group of investors put together by Davy has been written down to 5 cent in the euro.”—52acre-shankill-site-written-down-to-5-cent-in-euro-2096861.html

“Investors in the project have been told if the site is sold today they will get nothing back. The Woodbrook residential site has not got full planning permission and is now likely to go into NAMA, the toxic loan agency.
… the fortunes of the site are now tied to NAMA.”

For FF/PDs/Megadevelopers/Bankers/Investors NAMA was the only game in town. That’s why it had to happen – to save everything possible for them. At public expense.

NAMA is a cover up by the elite and a bailout for the elite. The logic used to justify NAMA by our rulers is insane. In order to avoid the immediate destruction of the country’s banks they are causing massive current and future destruction to the country itself. The Irish establishment’s crazed NAMA logic is only rivalled by that of the establishments of the planet Eminiar VII and its sister planet, Vendikar, in an episode of the original series of Star Trek.
“The landing party soon discovers that the entire war between the two planets is completely simulated by computers which launch wargame attacks and counterattacks, then calculate damage and select the dead… Anan 7 informs Kirk that the simulated attacks and following executions is the agreed system of war decided by both sides in a treaty with Vendikar. A conventional war was deemed too destructive to the environments and societies of both planets.”

“Kirk (David McWilliams) and Spock (Morgan Kelly) make their way to the wargame computers [Dept. of Finance], and once there, Kirk destroys the entire system [of NAMA] while Anan [Lenihan] looks on in terror. He exclaims that the planet is doomed [Iceland!]; with the treaty broken, the people of Vendikar [the bondholders] will fire their conventional weapons again.
Kirk encourages Anan 7 to instead call a ceasefire [bank resolution legislation and cancellation of guarantee] so that the two planets, with the Federation’s [EU’s] assistance, can learn to coexist in peace. A desperate Anan [Lenihan] agrees, and Ambassador Fox [Commissioner Almunia]immediately offers to lead the negotiations. As the Enterprise breaks orbit, Fox reports that the peace negotiations are going relatively well.”

@Oliver Vandt – “The board with no distressed loan collection experience (neither does the chief executive) have wangled an instant pay rise:”






I despair. It is all getting so stupid. Mind you, this is nothing compared to the handout the so-called professions are going to be gouging out of NAMA over the next few years. I’m sure Aer Lingus cabin staff will read this and wonder.

@Greg – “Take a deep breath or you’ll miss all the fun when the Cowen/Lenihan big bang is announced.”

I haven’t been keeping up with my reading on this over the past few days as I’ve been busy. What is this ‘big bang’ (some kind of announcement due?) you are talking about?


Yes the application of the discounts (SDR, financing, foreclosure, due diligence) is confusing but the Irish Times today is convinced that a 5% foreclosure discount will apply to every single loan.

My reading of the final Act and the regs still leaves me unclear though as NAMA’s over-riding objective is protecting taxpayers’ money I would expect NAMA to ALWAYS interpret the legislation in a way which reduces the taxpayer risk and seeks to maximise returns. The banks may be unhappy about this and may ask for the NAMA valuation to be arbitrated by DoF and Mr Lenihan and here’s another one of these “you couldn’t make it up” moments – Brian Lenihan’s over-riding objective may not be to protect taxpayers’ investment in NAMA – he may have his eye on recapitaliisations/nationalisations and indeed he may also put on his occasional political hat and determine the matter in a partisan way.


Big Bang – Black Hole: at least they are getting something right – even if it is morally wrong.

David O’Donnell
The judges cannot take part in a blog. Think about it. They would disqualify themselves from adjuducating on the issues they covered.

What is your background?


D McWilliams in Today’s Sunday Business Post

“In the past year, the Irish Central Bank has lent €10 billion to Anglo, using an instrument that it would prefer you knew nothing about. This instrument, called the ‘‘master loan repurchase agreement’’, is a hangover from when we had our own currency. Evidence of its existence is buried deep in the Central Bank’s balance sheet under the ambiguous title ‘‘other assets’’. The reason this is important is that it shows that, since Anglo was nationalised, it has gobbled up another €10 billion of our money. When Enda Kenny says there will be riots if Anglo receives another cent of public money, in away he is behind the times. The money has already been given to Anglo, via this secretive facility. Since last March, the Central Bank has lent Anglo €10 billion in return for so called collateral of €14.5 billion. But the only collateral Anglo has are worthless loans like the land for Woodbrook golf course in Shankill, which Davy Stockbrokers now estimates is worth 5 per cent of its 2006 purchase price. If we were to apply the same discount to the Central Bank’s loan to Anglo, we would see that the Central Bank – acting in our name – has lent €10 billion in exchange for collateral that is worth just over €750million.SotheCentral Bank has probably already lost over €9 billion. The only way this will ever be recovered is if Nama succeeds in driving the price of this land in Shankill backup.”

Phew! One, two, three, four, five ……. can anyone else substatiate this? 2_of_7? Anyone?

@ Brian

Back after the weekend.

You are correct I have applied the discount rate over 1 year – it is a simplifying assumption that all the cash comes in in year 1. Reality is that cashflow would be spread out over a number of years and the discount rate for year t would be 1/(1+r)^t

@ David O’D

the McWilliams article is stretching itself just a tad there. The collateral being used could as easily be government bonds as it could be dodgy loans. Indeed, i would have thought the Central Bank was only allowed take in collateral of a minimum investment quality/rating.

For instance, his line that “But the only collateral Anglo has are worthless loans like the land for Woodbrook golf course in Shankill” is categorically false.


Thanks for this. I would like to know more – and know that DMcW on a self-interest crusade at times and bit of loose cannon in international meedja ….. I also note activity by AIB – couple of billion – looks like further action before the discussion on the guarantee comes up ……… but if all these are Gov_Bonds – surely we are entitled to know ……… I find this lack of data/information/real_facts to be frightenign considering how much we are on the hook for with these cowboys …………. Gov Bonds or otherwise €10 billion is ten_billion …….. and at this stage I’ve lost trust in 2_of_7 as well …….. what is real? what is spin? IF we lose trust in present Central Bank it will be time to head for the mountains and tora_bora …

@Eoin “The collateral being used could as easily be government bonds as it could be dodgy loans.”

If the collateral they had was government bonds, then surely Anglo would using the normal ECB repo operations?

Page 42 of the last report from Anglo(here ) sheds (a little) light:
“Loans of €14,868m (30 September 2008: €nil; 31 March 2008: €nil) which have been assigned as collateral under a Master Loan Repurchase Agreement with the Central Bank and Financial Services Authority of Ireland.”

and on page 44 we get:

“€10.0 billion (30 September 2008: €nil; 31 March 2008: €nil) borrowed under a Master Loan Repurchase Agreement (‘MLRA’) with the Central Bank and Financial Services Authority of Ireland. The interest rate on this facility is set by the Central Bank and advised at each rollover, and is currently linked to the European Central Bank marginal lending facility rate. Collateral assigned under these agreements is derived from the Bank’s customer lending assets.”

So it certainly doesn’t look like government bonds to me.

@ Lorcan

interesting. Won’t this stuff just end up going to NAMA though anyway (when we’ll take actual physical ownership rather than just collateral claim)? So is it really that shocking or controversial? Would this not also fall under the emergency central bank assistance it has been receiving?

Page 14: “Total borrowings from central banks as at 31 March 2009 of €23.5 billion includes a special short term liquidity facility arranged through the Central Bank of Ireland in the early part of 2009. This facility stood at €10 billion at 31 March 2009.”

I also stand by my claim that McWilliams claim about Anglo and their lack of collateral just isn’t true – from the same report that have around €7.5bn in financial assets rated A or better which are available for sale.


“from the same report that have around €7.5bn in financial assets rated A or better which are available for sale.”

Would those assets be the same as these ones? “Loans of €7,709m (30 September 2008: €6,295m; 31 March 2008: €5,621m) which have been transferred to Anglo Irish Covered Bonds LLP, a Limited Liability Partnership which is consolidated by the Group. The transferred loans secure bonds issued under the Bank’s €10,000m (30 September 2008: €5,000m; 31 March 2008: €5,000m) UK covered bond programme. Bonds issued externally under this programme are included within debt securities in issue”

From my reading of the Anglo report, the bank seems to be ring-fencing certain of its better assets in different vehicles, like Anglo Irish Covered Bonds LLP mentioned above. The report also mentions Anglo Irish Mortgage Bank (which could operate as a stand alone institution as it has a banking licence) here:

“Loans of €5,850m (30: September 2008: €nil; 31 March 2008: €nil) which are included in the Anglo Irish Mortgage Bank (‘AIMB’) cover assets pool as collateral for commercial mortgage asset covered securities. AIMB, a wholly owned subsidiary of the Bank, was incorporated on 10 October 2008, and obtained its Irish banking licence on 10 December 2008. Its principal activity is the issuance of commercial mortgage asset covered securities, in accordance with the Asset Covered Securities Act, 2001 (as amended). AIMB is regulated by the Financial Regulator and is a designated commercial mortgage credit institution”

I think it is fairly unrealistic to suppose that the Master Loan Repurchase Agreements are backed by anything like the best of Anglo’s assets. The UK stuff, which is possibly quite good, has been shipped off in its own vehicle. The new mortgage bank seems to have tied up many of the performing mortgage debt. The ecb repos have netted them €13.5bn in liquidity.

The central bank have lent them €10bn on €14.8bn of what is left. What are the chances of the €14.8bn left being anything other than crud? If it was better quality, then there are many other funding options open to the bank..

The ‘shocking and controversial’ part comes in because the Master Loan Repurchase Agreements seem to ensue that we are now committed to paying for the mess that is anglo no matter what happens. Because the CB have kept the operation in-house then the exchequer is left either paying Anglo directly, or making up the CBs losses if the collateral they hold has to be liquidated and turns out to be worth less than the €10bn* they have committed to the bank.

*The €10bn was at mar ’09. the figure appears as part of the bank’s ‘other assets’ in table C2 of the monthly statistics. In feb ’09 that number was €1.5bn. In mar ’09 it jumped to €11.7bn. Currently it stands at €14.6bn.


Thank you.

This makes 2_of_7’s distinctions between 12billion to float and 20billion to drown look ridiculous. Asset stripping (AIMB), ring fencing (Anglo Irish Covered Bonds LLP), – in whose interests? Who gave IAMB a licence in Dec 08? Who authorised it? Who did these deals in Feb/March 09? Who authorised them? Blind Panic in Sept08 can be understood somewhat (if not agreed with) – not in Dec 08 and certainly not in Feb/Mar 09. This is TREASONABLE carry-on from a citizen perspective.


On Dates, Times, & Anglo_Irish : Mike Aynsley (new CEO) arrived post this €10billion that I’m trying to figure out: as did the present Governor of the Central Bank. Presently 4 Directors, and Minister to appoint a few more non-execs in coming weeks. Alan Dukes to take over as Chair in June as O’Connor stands down.

was appointed Chairman in December 2008 and Executive Chairman in February 2009, having joined the Board in June 2008. He was the Senior Partner of PricewaterhouseCoopers (PwC) in Ireland and was a member of the PwC Global Board and Chairman of the Eurofirms Board. He is a Non-executive Director of Elan Corporation plc and Readymix plc. He is a former Chairman of the Dublin Docklands Development Authority and a former Director of the Irish Auditing and Accounting Supervisory Authority.

who joined the Board in December 2008, is a Director and Public Affairs Consultant of Wilson Hartnell Public Relations Limited. He has served as Minister for various portfolios including Finance and Justice and is a former leader of Fine Gael. He was Director General of the Institute of European Affairs from 2003 to 2007.

who joined the Board on 21 January 2009, is a former Group Chief Executive and a former member of the Court of Directors of Bank of Ireland. He is a director of DCC plc and Axis Capital Holdings Limited and is also a member of the National Pension Reserve Fund Commission. He is a former chairman of BUPA Ireland Limited and Bristol & West plc

joined the bank as Chief Executive Officer in September 2009. Mr. Aynsley has over 30 years industry and consulting experience in banking and in financial services in Australia, New Zealand, the Asia Pacific Region and the United Kingdom. Prior to joining Anglo, Mr. Aynsley was working on a number of high-level projects since January 2006, in the areas of financial sector development, risk management, liquidity management and governance risk assessment. Previously, he held senior positions, including Chief Risk Officer in New Zealand for ANZ Bank and National Bank of New Zealand. Prior to this he was a Global Partner, Banking and Financial Services with Deloitte Consulting for five years. He was General Manager – Global Markets, Global Wholesale Financial Services for National Australia Bank from the early nineties, having held senior management positions with Security Pacific National Bank from the early eighties in Australia, Japan and the United Kingdom. He holds a Master of Business Administration degree from Macquarie University, which he obtained in 2007.”

On Corporate Responsibility

“We take a responsible approach to environmental issues and are proactive in seeking innovative ways in which to become more efficient. In addition, a fundamental aspect of our Corporate Responsibility (‘CR’) strategy has been our commitment to supporting the development of the wider community.”

“Below is the text of the Corporate Governance Statement from the 2008 Annual Report & Accounts.

On 15 January 2009 the Government announced that it would take steps that would enable the Bank to be taken into State ownership. The legislation providing for the transfer of all the shares of the Bank to the Minister for Finance was enacted under Irish law on 21 January 2009. On the same date the Bank was re-registered as a private limited company.

This Corporate governance statement describes how the Bank applied the principles of The Combined Code on Corporate Governance (‘The Combined Code’) issued by the Financial Reporting Council in June 2006 and the Bank’s compliance with The Combined Code’s provisions throughout the financial year ended 30 September 2008.

The Directors believe that the Group has complied with the provisions of The Combined Code throughout the financial year ended 30 September 2008.”

On the final sentence – methinks the exception may prove to be the rule here – ‘voluntary’ compliance has had its day in Corporate Governance wrt Irish banks as far as this citizen is concerned.


Yes – excellent stuff from LorcanRK and Eoin here ………. & Ronan L above …….. we are into NAMA exploded territory here –

On the Link – I’d believe more from the Trots – Monsieur Gurdgiev, who apparently does not visit this blog, albeit well versed in economics, is the recipient of the World Medal of Freedom, 2006 and Man of the Year, 2005 awards from the American Biographical Institute. Its awards have been denounced as scams by too numerous to mention … can one really trust this guy to be ‘true’ to say nothing about the ideological bent of a social scientist who labels a social science as ‘true’ – let alone a republic as ‘open’? I’ll stick with the pragmatists around here for me facts.


In 2005 the American Biographical Institute awarded 200 “Man of the Year” awards at between $195 and $ 295 each. Where are the other 199?

@ David O’Donnell

“Yes – excellent stuff from LorcanRK and Eoin here ………. & Ronan L above …….. we are into NAMA exploded territory here -”

No offence David but I’d leave Eoin out of that.

I suggest you look at his comments again.

Ronan L does trojan work.

@ David O’Donnell

I’m going to piggyback your “timeline” idea. But from another angle.

@ David O’Donnell

Your knowledge of the American Biographical Institute is beyond me.

Are the other 199 all Irish?


@ David O’Donnell,

“I’d believe more from the Trots”

How many do you know?

I think its fair to say that Gurdgiev is a little bit to the right of Lenin.

He is not a “Guru” to me. I am an atheist.

I simply gave the link.


The other 199 will all claim to be Irish on Wednesday – then they revert to being fundamentalist_free_mawrket_eeering buddies of Ghensis Khan, Sharah Phelan, Dik_een Chain_ee, F0x Newz OReilly and co on Thursday and the other 364 days in the year as they support the rip off of the known universe for an elite bunch of Ferengi.

Seriously, the timeline is important here …….. and we are running out of people in upper_echelon positions we can trust to give us facts – 2_of_7 is a real dis_apointment …

@ David O’Donnell,

Now now.

We’ve been warned before.

No Ferengi and no Alan Dukes.

@Greg, no need to leave Eoin out just because his opinions are different. It takes all sides to make a debate, and one of this site’s great strengths (other than the quality of the posts, of course) is the debates in the comments sections.

It is quite a testament to the people running this site that all informed opinion is welcome and debated here, without such debates generally disintegrating to name calling and other unpleasantness that is so common elsewhere.

For example, if Eoin had not made his comment earlier suggesting that Anglo’s collateral may have been government bonds, I would not have felt the need to enter the debate at all..


Yes – I support your comment here. Eoin is willing to engage. The ‘cut and thrust’ of differing viewpoints, and most (if not all) here can handle it, is what is of real value. Whether I agree or disagree is not the issue – but in a substantive blog the full range of validity claims – objective facts and states of affairs, social norms, and subjective experiences re genuineness/authenticity are available. And do we need this at the moment ………. do we what?

There have been no ‘warnings’ – merely an aesthetic difference of opinion on certain metaphorical illustrations. My relationship with Seven_of_9 is sound and she is an invaluable source of insight on the procedures, policies and processes of the Cube. Blind Biddy has taken to her as well.

@ LorcanRK

Accepted and very reasonably put.

Eoin and I have history.

I withdraw my previous.

@ David O’Donnell

“…the procedures, policies and processes of the Cube …”

Well Holy God.

The blind be seein.

How’s Blind Biddy.

Did Blind Biddy get to see the Cube?

Do you know the way out?

Does Biddy know the way out?

@ LorcanRK,

“@Greg, no need to leave Eoin out just because his opinions are different.”


How can you be sure that Eoin is not David O’Donnell?

Provide me with any difference between Eoin and David O’Donnell.

I dare you.


We are all in the CUBE at the mo – it’s called Naa_Maa. Dig for facts – we need facts so that we can map it, find our way out of it, and then put an end to it.

Seven_of_ Nine just energised to Washington/New York …. just meself and Blind Biddy at the mo.

@All re Anglo

Looks like Anglo gettin into Derivatives/CDSs …… Carswell in today’s Irish Times ……….

“[Anglo] Staff were also concerned by an internal note circulated last week by the AEC which detailed minutes of comments made by Mr Hunersen [Head of Anglo Corporate Development] at this month’s briefing. The note claimed that Mr Hunersen had said that Anglo planned to buy back the loans it was transferring into Nama at a significant discount to the price at which they were going in and that Anglo also planned to start trading in high-risk credit default swaps (CDS). Anglo management sources dismissed the internal staff note as inaccurate, saying that the note misinterpreted his comments. According to the sources, Mr Hunersen said during the briefing that the Irish bank system, including Anglo, would have to support Nama assets when they were refinanced into the market. He told the AEC that the bank planned to reduce its post-Nama loan book through syndication and securitisation deals, the sources said. They said that Mr Hunersen had not outlined in the discussion with staff this month any plans to start proprietary trading in CDS – contrary to the note circulated to employees, which was described by the sources as “unhelpful”.

Spots and a Leopard spring to mind – my apologies to all real leopards.


Anglo buying back debt at a discount? Normally, that might make sense. But that is surely not an “investment” that should be made at all? Is the capital they have been given not for a more productive purpose? Are they not being slimmed down? If not even wound down?

No wonder it is news!

I did predict that there would be more leaking and frankly, I am suprised at the small scale of it, so far.

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