Yesterday came the absolutely horrifying news that “DEVELOPMENT LANDS in Athlone, Co Westmeath, valued in 2006 at €31 million have a current value of €600,000, Bank of Ireland told the Commercial Court yesterday in a dispute with a developer over unpaid loans.”, a 98% fall in value and if banks had advanced the average NAMA-estimated LTV of 77% then the bank would have lent €24m and even with a 15% “long term economic value” built in the haircut would be
current value €600k
LTEV 15% €90k
Consideration to be paid to the bank €690k
Gross value of bank loand (assuming no rolled up interest) €24m
Haircut €23.310m or 97%
It is likely that there is rolled up interest so the haircut is likely to be more than 97% in this case! I’m sure the banks are praying this is an isolated case and not generally applicable to NAMA loans!