NAMA - Davys Morning Comment

[rubensni]

Do you know where the source for the notion that assets below €5m value will not be acquired by NAMA. It's not in any NAMA official documentation that I have read.

It was in the Nama Draft Business Plan. The deal is no individual loans above €5 million, except for the two participating building societies who face no such threshold.

Also the banks produced financial statements for NAMA last year which NAMA then collated and published in its Factbook http://www.nama.ie/Publications/2009...umentation.pdf which says for example that Anglo has total loans of 72.3bn yet Anglo was supposed to be transferring "only" 28.4 (that was last Sept, current estimates are 30-35bn). The Factbook says the Land and Development loans component was 17.7. Do you know how Anglo goes from 17.7 to 28 or 30-35?

I don't have a clue, I'm afraid. I'm not too bothered about what Anglo is transferring since the state owns it anyway.

Lastly are all "land and development" loans to be transferred or just the watch, vulnerable and impaired?

Yes, as far as I know the plan is to take em' all. The reasoning here is due to cross-securitised loans so that it will be easier to handle John P Developer when he submits his business plan, etc. as well as allowing the banks to come clean.

Of what exists in the real world that the "assets" are secured on, I believe approx. 1/3 are built and out there on the market today as developments (performing or otherwise), 1/3 are unfinished/under construction developments and 1/3 is land.

[rubensni]

Oh and just to clarify, Frank Fahey will only account for 43% of all the assets acquired by Nama

[inthemire]

Not exactly. Nama will only acquire assets from the participating institutions (i.e. the guaranteed banks). Only land and development loans, associated loans and the other loans to developers/development companies.
Nama doesn't have to buy any loan. It retains ultimate discretion as to what it takes.



No. There is very strict common law rules relating to the banker's duty of confidentiality. Simon Carswell of the Irish Times figured out who the first 10 developers were (not a huge feat considering who they are, but a worthwhile one all the same). They are pictured here:



As for the small time developer/Fianna Fáil councillor that will be more difficult to deduce who is in or out, and thus what assets (i.e. loans are in and out).



No. Nama retains ultimate discretion, but there will be very little picking and choosing as the whole point of Nama is to get the development/land loans off the banks' books.



Yes and no. The developers will submit business plans to Nama. Nama can advance money to developers to finish sites.

If a developer is not making payments Nama can move against them in the courts, and at that time sell assets. These likely would be offered for sale to the public by auction, but I don't know.

What they mean by assets in the context of Nama is the loans themselves. Nama may sell on assets (i.e. loans - but that's different from selling on property) and these assets would be sold to other financial institutions.

Much of the current speculation revolves around whether Nama will hold on to the loans associated with land and developments in London and the Home Counties where prices have bounced back rather quickly, or double down and advance cash to developers and adopt a "wait and see" strategy. Much of the chance for a profit being made by Nama comes from developments outside Ireland as the Irish economy is <ahem> "bankered", so I suspect that they will retain these performing assets in the Anglo Saxon world, but that's a hunch.



Not as far as I know. This would also relate to the banker's duty of confidentiality.



No.

Take a domestic analogy: would you contact a bank to buy your neighbour's house because you know he has a mortgage with them?

If Nama forecloses on a developer then you could buy an asset from Nama. But until that time Nama does not have title. To use the household analogy oncemore, Nama would be the mortgagee and your neighbour would be the mortgagor. The mortgagee cannot sell you your neighbour's house until he fails to make payments. At that point the mortgagee would own the asset and then would sell it to release the cash.



Now we enter the world of the conspiracy theory. There is very strict rules relating to any of this stuff, but I'm not going to bet that there won't be a few articles in the paper in 5-10 years time suggesting that there was corruption. This is Ireland after all.



No they won't. Nama will only acquire land or development loans and associated loans made by developers/development companies from the participating institutions (i.e. the guaranteed banks).

It's become a bit of a populist cry of late for people to ask "where's my Nama" but Nama is to benefit the banks by cleaning up their balance sheets. How they handle developers is a different matter. Even if a Nama for the little guy was unveiled there is no guarantee that the little guy would get off any easier than if they owed the money to a building society or bank.

Many many thanks Rubensni! Much appreciated - i will digest this!! Where it leads me, i dont know!!

[NAMAwinelake]

Rubensni

"It was in the Nama Draft Business Plan. The deal is no individual loans above €5 million, except for the two participating building societies who face no such threshold."

You mean the draft plan in October 2009 (I understand a "non-draft" business plan will be produced in June 2010 - try that with your bank manager next time you're applying for a business loan). This is the draft plan and I couldn't find a reference to €5m - I must admit I read the plan many times in the past but this morning I just did a search for '€5' and nothing! Is it in something else that NAMA have published?

The Building and Construction loans are nearly twice the NAMA loans and they exclude residential and consumer lending so it is only about 1/2 that are being transferred and I haven't seen the rationale.

[rubensni]

Rubensni

"It was in the Nama Draft Business Plan. The deal is no individual loans above €5 million, except for the two participating building societies who face no such threshold."

You mean the draft plan in October 2009 (I understand a "non-draft" business plan will be produced in June 2010 - try that with your bank manager next time you're applying for a business loan). This is the draft plan and I couldn't find a reference to €5m - I must admit I read the plan many times in the past but this morning I just did a search for '€5' and nothing! Is it in something else that NAMA have published?

The Building and Construction loans are nearly twice the NAMA loans and they exclude residential and consumer lending so it is only about 1/2 that are being transferred and I haven't seen the rationale.

Yes, the October plan. It's on the bottom of page 8 (http://www.nama.ie/Publications/2009...an_13OCT09.pdf)

[NAMAwinelake]

Rubensni, many thanks, found it using a different computer and possibly a different version of Adobe and that tells me why the loans to be transferred for AIB, Anglo and BoI are less than those found in the NAMA Information Booklet - the NAMA loans are a subset limited to loans which are L&D loans only with a value of over €5m. It also allows me to see exactly where the INBS NAMA loans are in the Information Booklet.

However EBS looks wrong. According to the Information Booklet EBS had 17.1bn loans of which €4.7bn were property and construction. I wonder why the EBS figure isn't €4.7bn then?

Also do you know why INBS and EBS are being treated differently to Anglo, BoI and AIB?

Thanks again, your responses are very informative.

[rubensni]

Rubensni, many thanks, found it using a different computer and possibly a different version of Adobe and that tells me why the loans to be transferred for AIB, Anglo and BoI are less than those found in the NAMA Information Booklet - the NAMA loans are a subset limited to loans which are L&D loans only with a value of over €5m. It also allows me to see exactly where the INBS NAMA loans are in the Information Booklet.

However EBS looks wrong. According to the Information Booklet EBS had 17.1bn loans of which €4.7bn were property and construction. I wonder why the EBS figure isn't €4.7bn then?

Also do you know why INBS and EBS are being treated differently to Anglo, BoI and AIB?

Thanks again, your responses are very informative.

Sorry, only spotted this now.
I have no idea why the building societies are being treated differently. I know that 80% of Irish Nationwide’s loan book relates to property investment and development, so that institution is effectively becoming an offshoot of Nama. As for EBS, it is getting out of commercial lending altogether.

Irish Nationwide and EBS are due to merge in the future also.

[NAMAwinelake]

Many thanks Rubensni, these loan figures from the institutions don't quite stack up - I can understand loans in September 2009 reducing as is apparently the case with AIB and BOI (perhaps there have been loan repayments). However I don't see how Anglo can go from 28bn to 30-35bn. A 7bn increase can't be additional interest in 5 months. Did they make a 7bn mistake, I wonder. And with BOI and AIB is the reduction also a mistake as institutions can't pick and choose which loans are eligible. Maybe we'll get a statement on Friday when the first NAMA schedules are due.

[rubensni]

Many thanks Rubensni, these loan figures from the institutions don't quite stack up - I can understand loans in September 2009 reducing as is apparently the case with AIB and BOI (perhaps there have been loan repayments). However I don't see how Anglo can go from 28bn to 30-35bn. A 7bn increase can't be additional interest in 5 months. Did they make a 7bn mistake, I wonder. And with BOI and AIB is the reduction also a mistake as institutions can't pick and choose which loans are eligible. Maybe we'll get a statement on Friday when the first NAMA schedules are due.

€7bn??? They didn't get it off Irish Life and Permanent?!

I added your blog to my google reader. Some good stuff on there. I don't know about you, but I think the standard of financial journalism in this country is pathetic. But for some notable exceptions, I think most of them don't know what they're on about.

[NAMAwinelake]

€7bn??? They didn't get it off Irish Life and Permanent?!

That thought went through my head and then I saw this morning that the former Anglo Chairman had been arrested which was amazing in light of Garda comments in the Irish Times two weeks ago which described the case as a "slow-burner" and there wouldn't be developments "for months". The €7bn is the reported upper max and of course there is nothing formal from NAMA so it could be dismissed as mis-reporting, but if it is right that is an amazing level of misclassification of loan last September.

I added your blog to my google reader. Some good stuff on there. I don't know about you, but I think the standard of financial journalism in this country is pathetic. But for some notable exceptions, I think most of them don't know what they're on about.

Many thanks and yes I agree with you, the standard of journalism is generally abysmal (economically illiterate, forever comparing apples with oranges, unable to set a story in context) and given the apparent leakage of information from NAMA (budgets, haircuts, operational details) I am disappointed that no-one take formal action to ensure information (particularly market moving information) reaches the public in a transparent way.