Brendan Keenan on the haircut

Today in the indo … 47673.html

Now ; this makes sense only if one assumes the developers ponied up 25% in pure (not borrowed elsewhere) equity. It implies a 25% haircut on the assets transferred. Yes?

Technically, 33% of the assets (loans) transferred: 25/75 = 33.3

90bn of property - 25% is €22.5bn.

Does anyone here really believe that the developers had 22.5bn in cold hard cash???

I, for one, do not believe it, and I reckon there’s plenty of credit, personal-guarantee’s, lending from multiple banks, etc., to suggest that the developers have probably ponied up less than 10% of the 90bn.

Carroll’s “spiders web” of companies and Lynn’s ability to take out several mortgages on the one property would provide anecdotal evidence that it was perfectly possible for the developers to borrow an extra 5%/10% of equity from a different institution without the banks knowing what the hell was going on.

My back of postage stamp calculation:

Original Loan €75
Original Property Value €100
Assumption: 75% Loan to Value Ratio

Current Loan Balance €79.5
Assumption: Original Principal of €75 plus interest roll-up for 2 years at 6% pa with interest roll up applying to 50% of transfered loans

Govt applies 25% discount when transfering the loans and pays €59.63 to bank for transferred loan.
Assumption: govt transfers loans to NAMA at 25% discount to current loan balances

The developer has lost €20.5 (€100 - €79.5)
The bank has lost €19.87 (€79.5 - €59.63)

Assumption: The current true market value of the loans is 50% of current loan balance then the current true market value is €39.75 (€79.5 * 50%)
The taxpayer has lost €19.87 (€59.63 - €39.75)

Ah Shure, we have all shared the pain :unamused: