As reported by the Independent today, the chief executive of the NTMA, John Corrigan, yesterday told a Dail Joint Committee that NAMA would make enough money to cover its costs. Given what we know about the funding arrangements for NAMA and the likely interest rates charged to NAMA borrowers this should not come as any surprise at all. If NAMA is taking over €81bn of loans and the average rate charged on the loans is 6-month Euribor plus 2% (as stated by the NAMA CEO at the Finance and Public Service hearing last week) and if NAMA is paying 6-month Euribor on NAMA bonds (which make up 95% of the consideration for the loans) and 5.25%-5.75% on the subordinated debt (which makes up the remaining 5%) and assuming that the consideration that NAMA pays for the loans is €50bn (which is at the higher end of the estimates flying around – the NAMA CEO last week was talking about €43bn and the NTMA CEO yesterday was talking about €47-49bn) and if 6-month Euribor is 1% then
- NAMA will pay 1% of 95% of €50bn (€475m) plus an average of 5.5% of 5% of €50bn (€138m), or a total of €613m per annum in interest on its consideration.
- NAMA will receive an average of 3% on the performing part of the €81bn.
- If the performing part of the €81bn was 25%, ie €20.4bn then the interest receivable would be €613m.
So what the NTMA CEO was saying was that even if the performing loans are 25% of the portfolio then NAMA will receive as much interest as it pays out. The NAMA draft business plan assumed 40% of the loans would be performing. The NAMA CEO last week said that in relation to the first draft that 33% were performing. So it would appear, on the face of it, prudent to say that NAMA will receive more interest than it pays out.
For full details of the terms of the securities (NAMA bonds and subordinated debt) being used by NAMA, click here.
NAMA Wine Lake 
Very good. We are still left with:
1. Difference between interest figures in table 5 and table 7 even after adjusting for recent developments. Also, your interest values are much lower than those in table 5. Wonder why?
2. The €0.24 bn expected annual fees.
Brian, yes an explanation is needed to support the figures in tables 5 and 7 but by referring to the details of the NAMA securities and the statement from the NAMA CEO that the average interest chargeable on NAMA loans appears to be 6 month Euribor plus 2%, how can table 5 and 7 now be valid?
How much of the €0.24m is rechargeable to the financial institutions? the 5% enforecement and 0.25% due diligence charged to the financial intitutions amounts to €2788m. Also was there really to be no inflation whatsoever in the administration costs over 10 years?
As you say a proper business plan would clear up these questions.
Let me give you another example of the sloppiness of the BP.
Look at table 5 which proports to be a cashflow projection. They have allocated the €2.64 billion in fees in equal amounts over the ten years. It means that the cashflow relating to fees in 2020 is huge relative to Nama’s activity in that year. These fees (assuming that the overall estimate is reasonable) should have been much higher for the earlier years. This would have reduced the NPV.
I wonder if in two months time, we will have statements from the NAMA CEO echoing what he said about the banks – but this time about discovering horror upon horror with the draft business plan? My betting is that the bottom line will still be in profit but the recoverability might go from 80% to less than 50%, but there will be a prediction that property prices will rise by markedly more than 10% over 10 years and I think a new dimension will be introduced to the BP – third party investment, and it may be the third party investment that saves the day (mightn’t apply to unneeded part-complete ghost estates but does to some commercial developments, and most certainly does to some international developments eg UK.)
It might also provide Mank with a few laughs because, like all industries, there are big egos and some of those egos would rather die than work with some rivals. Some of the rivals who were lucky or some might say, well-managed enough, to preserve cash are waiting in the wings to swoop on some NAMA assets.
As indicated in another posting, breakeven on a cash basis is not enough!!! Allowing for write offs (e.g. €10 bn of uncollected rolled up interest), I expect that Nama will show a big loss in the P&Ls.
Yes, the vultures are circling. What I wonder about is whether they will be using the same firms of estate agents, lawyers and accountants that are working for Nama? I also wonder where they will find the funds given that Irish banks are unlikely to help and many foreign banks will shy away having already been bitten. This really means that the vultures won’t move on Irish assets until prices are rediculously low (and the taxpayer suffers even more).
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