Nama to buy loans for 54 Billion

So what about Lenihans assertion that all it will take is a 10% rise in property prices over 10 years to break even.
Assuming(and I know its a big assumption) that the 47Bn is at present the market value and the bottom, whats wrong with this argument.

he actually said that?

**Do not go gentle into that good night **
by **Dylan Thomas **

Do not go gentle into that good night,
Old age should burn and rave at close of day;
Rage, rage against the dying of the light.

Though wise men at their end know dark is right,
Because their words had forked no lightning they
Do not go gentle into that good night.

Good men, the last wave by, crying how bright
Their frail deeds might have danced in a green bay,
Rage, rage against the dying of the light.

Wild men who caught and sang the sun in flight,
And learn, too late, they grieved it on its way,
Do not go gentle into that good night.

Grave men, near death, who see with blinding sight
Blind eyes could blaze like meteors and be gay,
Rage, rage against the dying of the light.

And you, my father, there on the sad height,
Curse, bless, me now with your fierce tears, I pray.
Do not go gentle into that good night.
Rage, rage against the dying of the light.

And what are the populations of the UK and the US?

the 10% comes from a simpleton argument that goes like this we are overpaying by 15% and 5% of the gift is subordinated therefore we only need 10% uplift in property prices. It ignores some of the following:

(1) 36% of the 77bln is ‘associated loans’ whatever that means. You can only assume that much of these ‘associated loans’ have not been used to aquire/develop properties so any uplift in property prices is not going to make a jot of difference to this portion of the loan book. Probably a fair chunk of it was for developers to play the CFD game in stockmarkets etc.

(2) Based on 9 bln interest rollup, assume say this has been accumulating over last 4 years at a interest rate of 4% and it looks like about 75% of the 77 bln is failing to make any interest payments at all. This leaves interest payments on the good 25% of the 77 bln to cover the cost of the coupon payments which START at 1.2bln pa. We’re probably lucky if it will pay half of that. So regardless of what happens to property prices the taxpayer will end up paying large chunks of the interest. his argument ignores this cost.

(3) Any semi built developments will require significant capital to put the project in a saleable condition. This has been ignored. The loan book will rise above 77 bln. A 10% increase in property prices will not cover this.

(4) As you rightly point out the 47bln is the big assumption here. theyve got there based on an assumption that property has fallen 50% AND the original LTV was 77%. We know 50% is at least the fall for good stock residential but this stuff NAMA is taking on is not decent residential. This is not a mortgage book. Lots of it ‘associated’ and the rest is???

this is a good analysis. unfortunately the vast majority of people in this country will not form critical opinions on this, or most other matters, they will rely on the soundbytes from news headlines or interviews. they also belive what they want to believe. in 5 or 10 years time when we will be paying dearly, it will be dressed up and covered up in the country’s finances. in fact most people will no longer even consider themselves paying for it… FF will claim this legislation was the spark to reignite the economy, even if that takes 10 years or more. no change there then.
i expect this to be passed without any major hiccup. then in december FF and the elites will ‘allow’ various interest groups in society let off steam on the budget cuts etc. some flagship issue like the medical cards for pensioners (not insignificant but pales in significance to NAMA for example) will dominate the airwaves and pub discussions for weeks.
its all going to plan

If you believe in the concept of a dream house, you can become emotionally bound up in the purchase of a particular house which is your “dream house”. This is exploited by estate agents and very often limits your ability to look at the purchase in cold hard economic terms.

I see nothing wrong with buying a house. I see lots wrong with convincing yourself that there is one perfect house out there that you have to have. Tying yourself up emotionally in the purchase of The One PerFect Dream House creates chains for yourself, not freedom. There is always another house you will like.

So I am not sure what disconnect you see.

Really if Lenihan is right about the market dropping 50% then the loans are worth more around 40 billion.
What about interest roll ups and leveraging as TUG pointed out!! Adds to the bill/decreases the value of the loans/“assets”.

If we pay 54 Billion for something that may be worth 40 Billion there is no discount there its a blatant overpayment.
We are paying 135% So quit this bullshit talk of a discount your making FF look good. Its all spin.

Now Im off to make a huge fry up :stuck_out_tongue: … =H7&Page=7

So he says 77 Billion of loans. Current market value of

Peak in 2007? Wha?

Yeah but if the leverage was initially about 30%, then 77 = 100, which gives you your 50% dropish, give or take although that interest roll up angle if correct devalues it a bit alright…

Recorded peak, lagged the index… PTSB probably… Go to the back of the class, D-…

Commercial property peaked later than residential, which peaked in autumn 2006. … 5328.shtml

The old thread ^^

Did the minister say which figures will be varied by the analysis of the actual underlying properties?

i.e. the 54bn figure, which is 115% of the CMV of 47bn.

If the 47bn is deemed to be 10% too great, then is the amount to the banks also reduced by 10% (ie the banks get 115% of CMV) or is that sticking at 54bn irrespective of the CMV?


nama buys loans not property :confused:

Say there is 40% (18.8bn) of the loans that are performing (and stay performing). Assuming Lenihan has paid face value, NAMA will get back the principal and interest.

Then we’re left with 60% (28.2bn) that default. A 10% increase on these raise 2.82bn, not the 7 bn! Using these splits, prices would need to rise by 25% to get you 7bn.

Someone is going to have to take on faith that the LTEV of these loans is 54 bn, that’s the taxpayer for the moment… Some private entity, loaned the money perhaps by AIB / BOI or an outside investor (yeah, right) need only look for a discount on this mooted LTEV figure and NAMA is guaranteed loss making. The logic is capricious at the best of times and downright insane mainly.

Anybody taking these toxic loans off the hands of the Irish taxpayer will look for a discount on this LTEV figure.

And any developer looking to pay back his loan will renegotiate his debt back to the bare minimum or default entirely. Again, this is the downfall of the gaussian copula function revisited, the risk attached to widespread default on these loans is minimal, in fact, rated at zero %, when the tangible danger is not so much iceberg sighted off the port bow but impact imminent.

Unless of couse, AIB / BOI are tasked with lending and finding new perpetrators but this brings Ireland’s economic Ice Age into another 2/3 year horizon at best and leaves us wide open to the most catastrophic double dip recession in the history of modern finance.

Yea, did people really expect anything different? I’ve almost lost interest in this whole debacle as it will happen no matter what - Irish people don’t have the bottle to take this one to the streets until it’s too late.

So if BoI and AIB are both transferring their assets at significantly less than 30%, just what exactly is the Anglo discount.

It just crossed my mind that when the real figures come out, the breakdown of the amount paid for the various loans could be such that the haircut is disproportionately on the Anglo loan book (and consequently the Irish Tax Payer) rather than AIB/BOI?
For example (admittedly a worst case scenario) it could be as follows:
Allied Irish Bank for loan book of** €24B**; we paid €24B
Bank of Ireland for loan book of €16B; we paid €16B
EBS for loan book of €1B; we paid €1B
INBS for loan book of** €8B**; we paid €8B
Anglo Irish Bank for loan book of €28B; we paid €5B

The total amount paid for the loan book of €77B would be still be €54B but the main banks would be protected.

Is there anything in the NAMA legislation to ensure that the 30% haircut is applied evenly across the bank loan books being purchased?