Nama makes €140m profit on loan

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Happened a few weeks ago. Any comment on it then?

The Indo has a better article.

Simple.
NAMA is being fed bad loans with a splattering of good loans.
Unfortunately no matter how much profit NAMA can make on the sale of the good loans, theres no way in hell it can make even a dent on the losses from the bad loans.

Incidentially, is my memory failing me or was the original strategy to use the *repayments *from these good loans to offset the non-payments from the bad loans ?

Were such sales so early on envisaged as part of NAMAs original strategy ?

How is there profit here? Any “profit” made has to be balanced by the amount put in to recapitalise the same banks. NAMA cannot make a profit.

Only thing I can find from NAMAWineLake (around the time of that article) is this car park in Mayfair:
namawinelake.wordpress.com/2010/ … for-e211m/

And it looks like it’s fallen through:

https://namawinelake.wordpress.com/2010/11/12/uk-commercial-property-–-increase-of-0-1-month-on-month-in-october-2010-is-the-steam-running-out-of-the-uk-recovery/

Hold on a second now, there’s something seriously wrong about this. If a middle eastern investor bought it for 180m then presumably there were other middle eastern investors interested at the 100-150m mark as well.

So why did Anglo transfer it as such an artificially low price? Are we to believe that NAMA and Anglo have, in response to the EU and public scrutiny, over estimated the falls in commercial property?

Or, is it possible that NAMA didn’t actually make a profit as such? I mean, the facts are:

  1. loan of €80m sold to NAMA for €40.
  2. loan is secured on property in London.
  3. property in london sells for €180m

That’s all we know. Firstly, it would be simply illegal for NAMA to recoup more than the value of the loan. Persumably there is some investor out there who bought the place and had the 80m secured against it. Wouldn’t he be mightily pissed off if the 100m profit he should have made on the deal was taken by NAMA for no reason whatsoever? But even if it is desireable that NAMA should get this profit (or the £50m as reported by namawinelake) they are simply not entitled to it. NAMA own the loan, not the property.

IMO, what is missing is that the loan was probably only one of several charges against the property. So NAMA might have a loan of €80m against a property which sells for more than €80m, but there could be another few loans secured against the same property for the same again or more.

Arguably the best case scenario is that NAMA gets the full value of the loan back (i.e. 80m). At worst, maybe there is a problem with the title as secured and they’ll get nothing.

I am open to correction, but I believe the loans are bundled up - good with bad.

This may have been one of 10 loans transferred within the same bundle.
The other 9 may be dogs with massive underlying losses.
Thus we pay too little for the good ones, but (my God), we pay too much for the bad ones.

From memory, I believe the original strategy was to use the interest repayments from the good loans to subsidise the non-payment of interest from the bad loans.

Selling a carpark in Mayfair for a profit must be seen in the context of what the other loans in the bundle would sell for.
I know where my money would be if I had to bet on an overall profit or loss.

OK.

If I have a bundle of 10 loans with a face value of €100m and a NAMA value of €50m, I have bought 1bn worth of loans for 500m.

Some of these will be recovered, others wont. However, no individual loan can ever realistically get me back more than its face value of €100m. So supposing one of the ghost estates in Cavan turns out to be sitting on an oil well, and the land goes from a value of €30m to €1,100m overnight and is sold to Shell for that price.

If there are no other loans on that land, the proceeds of the sale will be: €100m to me in full discharge of the loan, and €1bn to Joe Developer who gets the benefit of the windfall. There is nothing in NAMA, as far as I’m aware, which allows NAMA to take more of the €1.1bn sale price than the face value of the loan, as such would be almost certainly unconstitutional.

The other loans are worth nothing. But even though the €1bn of loans can raise €1.1bn in sale, only €100m of that money can actually be used to pay back into the bundle.

So I just don’t see how NAMA can make a profit greater than the nominal value of the loan. Either there are other charges on the land and the money is divvied up accordingly, or else the surplus of sale price over nominal loan value is given back to the borrower/landowner, and not given as a sort of gift to NAMA.

This news story just doesn’t make sense to me.