The details released today regarding the first tranche of loans to be transferred to NAMA from the five participating institutions offer plenty by way of headlines:
- NAMA is to apply an average discount of 47% on this first batch of loans. These loans, originally worth €16bn, will be bought for €8.5bn.
- Of the €8.5bn in loans, €4.9 billion relate to assets located in Ireland; €3.2 billion in Britain; and €0.4 billion in other countries. None of this first batch of loans relate to assets located in Northern Ireland.
- Investment properties make up the bulk of the underlying assets, which account for €5.5bn. €1.3bn is in land, €0.8bn in hotels, and residential property makes up 0.4%.
However, the NAMA release also leaves much to ponder regarding what is to come in subsequent waves.
The following are just a few of the questions that arise:
- How representative is this first wave of €16 billion loans of the entire NAMA portfolio? In particular, development land and hotels are underrepresented in this sample. Will their inclusion increase the “haircut” still further?
- This first wave of loans only represents the ten largest builders/developers. Do their investments represent better or worse quality investments than those of smaller developers associated with ghost estates across the country?
- Will it transpire that the ten largest builders/developers were required by Irish banks to invest less of their own equity into development projects than smaller developers?
- Security for loans: Where the title of the underlying assets is of bad quality, NAMA legislation provides for an additional haircut which would allow NAMA to purchase loan for a nominal sum. To what extent will NAMA need to avail of this power?
- The first wave of loans gives no indication of the expected level of default that NAMA will experience. Does NAMA maintain that the default level will be 20%, as per the NAMA business plan?
- How will the geography of the first waves of loans, and in particular the omission of Northern Ireland from this sample, differ in subsequent waves?
- The following information has been provided regarding the Special Purpose Vehicle Investors:
“NAMA has secured a combined investment of €51m from three institutions (€17m each) for a 51% shareholding in National Asset Management Agency Investment Ltd, the NAMA Special Purpose Vehicle. The investors are Irish Life Assurance, New Ireland and major pension and institutional clients of AIB Investment Managers (AIBIM). NAMA will hold the remaining 49% but will have a veto over all decisions that are not in accordance with the objectives of NAMA as specified under the NAMA Act.”
What, if any, influence will these three private investors have in the future operations of NAMA?
If today’s exercise in “drawing a line in the sand” was aimed at removing uncertainty, there’s still a long way to go.
Declan Curran
Ireland after NAMA 
March 30, 2010 at 5:44 pm
No statements on LEV or MV of NAMA loan assets overall.
There is a statement in the NAMA briefing that 10% over 10 years is still the magic number increase in asset prices to allow NAMA to breakeven (ASSUMING THAT THE LOAN DEFAULT RATE IS 100%)
No statement on loan default rates overall – 20% in the original draft is looking increasingly idiotic.
No statement about whether the first loans are subject to EU/Regulator review and whether valuation disputes have been raised.
Overall (so far) a bit of a disappointment on the information front today – the 50% discount on Anglo’s first loans of €10bn looks snowflake-like perfect and in that sense suspicious.
And NAMA have for all intents and purposes missed the March 31st deadline – the loans paid thus far amount to €370m and may be subject to claw-back and/or valuation disputes. Look forward to another statement when Anglo’s loans are first transferred.
March 31, 2010 at 11:13 am
Yes, the minister created a great dividing line while sand drawing. This line is not between bankers and de plane peeple of Iurland; it is between those who will benefit from the recovery of a “viable banking system” and those who will pay for it.
March 31, 2010 at 11:17 am
Jeez, who’s going to benefit?!
March 31, 2010 at 12:24 pm
I wonder whether Irish Life Assurance, New Ireland and major pension and institutional clients of AIB Investment Managers are senior or subordinate bond holders in Anglo Irish Bank?
If so I can only imagine that we will have a generation long tribunal to sort out that particular mess.