Not at all, in fact it was when checking tranche 1 again that I noticed that they changed the numbers! And that’s when I thought of yourselves, especially zhou on this one.

What I find frustrating is that an increased €1.2bn cost to NAMA might have an increased revenue but because there is no P&L, BS or Cashflow and indeed the calculation of consideration payable, as you have pointed out many times, is still shrouded in mystery.

What was I thinking? I knew I should have checked your site first. Will put a link to this on the front page.

yes that’s the calculation - not meaning to divert from irisheconomy.ie there is a detailed examination of the figures from earlier this afternoon at

http://namawinelake.wordpress.com/2010/07/08/exclusive-internal-error-in-nama-business-plan-underestimates-costs-by-e1-2bn-and-places-base-plan-of-e1bn-npv-at-risk/

Ok, this is weird. I was just doing the exact same calculation.

http://dl.dropbox.com/u/6326317/Haircut%20Details.xls

Great nerds thinking alike. I think this is pretty important — will put it on the front page when I get a bit of time later.

Because there is no P&L, BS or cashflow by year, it is not possible to be clear about the situation but NAMA have cocked up the calculation of consideration to be paid.

Thanks for that - if they were going to change historical documents, you’d think they’d start with the draft Business Plan

Email address is jagdipsingh2008 at hotmail dot co dot uk

Where can I get your email address?

great spot by the way

I have the old document and will email it to you.

Some interesting stats:
EBS now transferring much less in first three tranches (0.8bn -> 0.4bn).
AIB now getting 42% haircut instead of 43%.
Anglo haircut up to 55% from 50%.
€0.7bn of Anglo loan moved from T1 into T2.
Substantially more UK assets (38%) included than previously expected (30%).
More land (15% -> 28%) and residential property for resale (5% -> 14%) included. Less investment Property (65% -> 53%) now included. [Does this part-explain less cash-flow?]

NAMA must not agree with the banks’ classification of loans. The €0.7bn moved into Anglo’s T2 does not explain it.

Supposing they are mostly paying fixed in return for floating, set up in 2007 when interest rates were rising. This would be a natural hedge for the bank to suggest to the borrower, no? (”Fix your costs at x%, no chance it’ll cost you more”).

The result could be that Anglo are paying a fixed rate, receiving no income (because the loan is not performing) and also paying for the money they used to give the loan in the first place (either through bonds or deposits). So they could be paying 5% fixed, with a cost of money of 4.25% (big institutional deposit) and receiving 1.25% in return (euribor plus a bit). 8% payout on 14 bn a year is 1.12 bn…

Some questions:
1. Is that a likely scenario?
2. Do we know the nature of the derivatives that are being transferred? I recall seeing that they were hedges and not from the trading book, is this still the case?
3. Any idea what the fixed and floating margins are? (i.e. the difference between current rates or ten year swap rates?)
4. I presume that NAMA, in transferring the swaps at zero value, is betting that they will come back into the money - that interest rates will rise in future to levels that make them worthwhile?
5. Do we know who the counterparties to the Anglo IRS were? (I still think that derivatives are the reason Anglo is systemic - the question is to whom…).

We are back to the fundamental unresolved problems of our economic development. Meanwhile, the public are quietly awaiting a return to the economic ‘normality’ of the last 30 years, or at least for better emigration prospects. It seems to me those buses may not come. Wherever we are headed, it will not resemble the Ireland, or the global economy, we have known recently.

The New York Times had an article yesterday where a World War II vet advises his unemployed graduate grandson to emigrate to Europe.

It appears that Ireland has yet to get to grips with the reality of what some in the US is called the ‘new normal.’

Today Batt O’Keeffe said Enterprise Ireland supported companies will create 60,000 jobs in the next five years.

They lost 19,000 jobs in 2009 to close the year with 134,000 jobs.

The magic of the 60,000 figure is that there may not be any additional jobs by 2015 and still the minister could not be accused in a strict legal sense, of being economical with the truth.

http://www.finfacts.ie/irishfinancenews/article_1020109.shtml

The IDA has a target of 105,000 new jobs by 2014.

Removing the spoof of indirect jobs, the total for direct jobs is 62,000. Again, there may not be any additional jobs.

In the boom years of 2004-2008, IDA Ireland companies added an average of 11,000 new jobs annually, with 60 per cent in financial services and software. It lost an average of 9,600 annually.

It’s easy to set targets.

Are you there? NAMA are now changing historical documents. Specifically they have changed the key tranche 1 data document.

http://www.nama.ie/Publications/2010/NAMATranche1.pdf

I recall getting headaches trying to work out how NAMA had calculated the LEV and CMV of the property and then how that related to the LEV and CMV of the loans and the consideration paid. Well NAMA have now gone and changed the figures and if you were being unkind you might suspect that they got the calculations or headings wrong.

Lucklily the record of what this document said is contained in debates on these pages - NAMA said the LEV of property in the first tranches was 10.44bn and the CMV 9.44bn (ie a difference of 11%). Take a look at the changed document on NAMA’s website and you will see that the CMV is 7.45bn and LEV property is 8.27bn (still an 11% difference).

Does either the unpublicised change in an historical document or the fact that NAMA did not highlight the change in its recent Business Plan raise serious issues as to the integrity of NAMA’s methods?

The other side of the coin, if you talk to people who live in other parts of the world, where property tax was based on retail value of property - it had a depressing effect, in that people were incentivised not to maintain their properties, and have lower property taxes. I spoke to a real estate agent from one of the holiday resort islands, who was telling me about it. A badly implemented scheme is very depressing to investment. I don’t know enough about the nurse working in Boston who has a holiday home in Ireland, instead of Massachusetts, to comment, but certainly it does appear there are imbalances regarding property taxation in Ireland versus abroad. It didn’t stop ex. Anglo bankers I guess. But taxation policy has focussed a lot on imbalances on labour tax, between Ireland and abroad. I haven’t read much in relation to property tax. BOH.

Point taken, tanx.

@ Irish Muffin,

Very interesting point. I was reading BRE (Building Research Establishment) SAP 2005 website today, going through some of the release notes to their software for energy ratings. It appears as though, there are exemptions from paying of Land Value Stamp Duty in the UK, if you are willing to participate in some kind of energy upgrade works. I don’t know a lot about this. But I guess, the point about Ireland is that we never had any form of property tax to begin with - making it impossible now to provide ’stimulus’ or ‘incentive’ to that sector, by creating exemptions, which homeowners might avail of - along the lines you have suggested. BOH.

I can’t see anything that would make the NAMA bonds unattractive to a potential suitor for an Irish Bank and that would make it a deal breaker. Better than having millions of euro worth of development loans in Leitrim and Longford (no offence to either location!)

NAMA bonds are definitely not for sale, however they will be used in both ECB repos and private repo’s/collateralised transactions.

Wallets Full of Blood: Roscommon Death Trip
http://vimeo.com/13167154

‘The injustice of time - rendered obsolete.’

Rain falls on the snow. The Contagion has taken hold. Ghosts from the old Dead Republic are emerging everywhere as the day of judgement approaches.

On Black Tuesday a guilt ridden political functionary runs from his job burying bodies in the city. He is tortured by voices of reproach as he journeys towards home. He recounts the history of his dealings with Fingers - a boss ‘who made the old boss look like Mother Teresa’.

Meanwhile, back in the city, amid the spiraling negativity, Fingers and his acolytes lay the foundations for a new Easter Rising.

‘Roscommon Death Trip’ is the final installment of the ‘Wallets Full of Blood’ trilogy. The previous installments were ‘Houses on the Moon’ (2009): http://www.vimeo.com/3269259 and ‘Zombie Banker Blues’ (2009): http://www.vimeo.com/4292136

Technically as far as I know the NAMA bonds can be traded but that’s not going to happen. You will never see them being offered on the open market.

Just another question if I may - to what extent would the same NAMA bonds, be in some sort of common ECB format - which might simply affairs and legal arrangements later on, say if another large European bank was to merge itself with one of the Irish banks? You know what I am saying? Are there other countries under the ECB’s jurisdiction, which will be operating along the same lines as Ireland is? Though of course, the details of every rescue, asset management effort, will vary from country to country. Maybe you don’t know this, but it would be nice to have the bonds in some format that might make the Irish bank attractive to another buyer. BOH.

NAMA is meant to be a black box, but thanks to the genuine expertise (not mine) in the blogging community, a bit of light is getting in. Even for the lay public, the act is less and less convincing. Is the purpose to ’save’ our banking system, or to shore up property values blindly ?

One way or the other, the NAMA/Anglo punt looks like bankupting our state in a definitive manner. That painful reality leaves us with a semi-detached FDI sector, a deflating, technically weak domestic economy and a poorly managed public sector. Absent a reset, employment prospects have to be dire.

We are back to the fundamental unresolved problems of our economic development. Meanwhile, the public are quietly awaiting a return to the economic ‘normality’ of the last 30 years, or at least for better emigration prospects. It seems to me those buses may not come. Wherever we are headed, it will not resemble the Ireland, or the global economy, we have known recently.

They are not going to sell the bonds. The banks get NAMA bonds in exchange for the loans. They will hold these bonds on their balance sheet but use them in repo transactions with the ECB to get cash. Technically as far as I know the NAMA bonds can be traded but that’s not going to happen. You will never see them being offered on the open market.

So who are the Irish banks going to sell their NAMA bonds to? And how are buyers of the same, going to establish providence for what they are buying, except to tie it back to debt issued by the Irish sovereign? Granted, it may become one or two steps removed, and we will have virtually no control over what type of instruments the NAMA bonds will eventually become mixed up in. Especially, if/when the Irish banks with their nice new cleaned up balance sheets are maybe re-sold to foreign institutions. BOH.

The Government or NAMA doesn’t have to issue debt in the international markets in relation to NAMA and there are no NAMA bonds trading on the open market (and unlikely to be any) so there is no funding competiton between NAMA and the State.

Is the official fiction that decoupled NAMA from sovereign debt finally exposed or is there a bit more mileage in this farce?

Good question, I can’t remember if the NAMA special purpose vehicle did its job or not. I.e. Has met with ECB approval. Perhaps the conclusion that economists at IE blog have arrived at is, markets are more than capable of doing some basic maths for themselves and arriving at a good estimate of Ireland’s soverign debt exposure. I would like to pull in a couple of more issues if I may. I do recall reading a number of Boone and Johnson blog entries about Ireland - I mean, they are a couple of influential voices within the economics community, who can give a really good view from the outside of this island. Does a blog entry by such outside economists reflect in any way the views held by the large international debt investors? It will be interesting to re-visit those external assessments of Ireland, in future years to see how accurate or otherwise they were.

Wasn’t it the re-capitalisation of Anglo Irish bank, which had to be included as part of the sovereign debt? In terms of NAMA, someone can correct me if I am wrong, but the economists here strenuously argued from the get-go, that NAMA is about the Irish sovereign issuing more debt to the international markets. The issue arising out of that is, does the international market know how to distinguish between NAMA bond, sovereign bond, or Paddy bond auctions held at alternate monthly intervals? To what degree will one influence the other? Then I guess, the whole issue of PIIGS and fiscal instability of the Eurozone in general becomes part of the whole problem. BOH.

Is the official fiction that decoupled NAMA from sovereign debt finally exposed or is there a bit more mileage in this farce?

http://www.c-ebs.org/documents/Publications/Other-Publications/Others/2010/ST_FollowupPR.aspx