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Archive for June 5th, 2010

The Irish Times reports today that NAMA will “shortly begin” examining developer Business Plans even though some developers are only now in the “final stages of preparing proposals”. The article goes on to say “Nama has lined up a panel of independent consultants, mainly, it is understood, from Britain, who will begin reviewing each plan and advising the agency on what steps it should take next.”

Three areas of confusion:

1. Who are the independent consultants that have been “lined up”? NAMA published a tender document on 11th January 2010 with a closing date of 22nd January, 2010 and yet as of today 5th June, 2010, it does not appear to have been awarded.

2. What happened to the 30-day rule, that developers had to submit plans within 30 days of their loans transferring to NAMA. The first tranche was transferred in March 2010 (though it was the first week of April when all but Anglo were transferred, Anglo transferring by 10th May, 2010). Also, although the Irish Glass Bottle site has reportedly been transferred in the first tranche (and that was an Anglo loan), the borrowers have apparently until the end of July to produce a business plan.

3. That €250m advance to NAMA in May 2010. What is that being spent on? It’s a significant sum and if the analysis of the developer Business Plan will only “shortly begin”, then how can NAMA be sure spending it is financially sound?

UPDATE: 6th June, 2010 the Sunday Tribune reports that over half the business plans thus far submitted have been returned to the developers (or project facilitators as NAMA calls them) with a note saying “must do better”. Of significance is the reported fact that NAMA will permit financial restructuring of the loans if the borrower can show a return to solvency in 3-5 years. This would appear to be at odds with previous tough statements that NAMA will not allow interest roll-ups. Are things that dire?

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This entry advances the theme considered earlier this week about the timing of the latest €2bn injection into Anglo. Consider the extract from a spreadsheet below which examines NAMA-bound loans at Anglo Irish Bank.

Notes:

1 – Anglo financial statements for 15 months ending 31 December 2009 (includes €3.8bn 2009 injection and €8.3bn injection announced at end March 2010)

2. NAMA Tranche 1

3. Calculated figure

4. Injection of €2bn on 28th May, 2010. According to RTE “A statement from the Department of Finance said the bank needed new funds because of the losses it had taken on the loans transferred to the National Asset Management Agency and because of further losses on its remaining loans.” Note for the purposes of this analysis it is assumed the €2bn is totally applied to the NAMA provision. This is the best case scenario.

5. Calculated figure

6. NAMA statements yesterday, Independent commentary – see below

7. Calculated figure

Yesterday on the sidelines of the Certified Public Accountants Annual Conference, NAMA Chairman Frank Daly is quoted by the Irish Independent as saying “The discount on the first tranche was 50pc . . . I won’t imagine that will change enormously, but I am caveating that until we get the full loans across we won’t get the exact figure”. The Independent’s Laura Noonan goes on to say herself “The comments imply a 55pc discount on the €7.3bn worth of Anglo loans in tranche two”.

Firstly Frank Daly did some “caveating” and secondly Laura Noonan would seem to go too far with her syllogism that if the overall haircut in tranche 2 is similar to tranche 1 and the tranche 1 discount for Anglo was 55% then the tranche 2 discount for Anglo is 55%. However if both Frank and Laura are right then Anglo are left with a remaining NAMA-bound balance of €19bn of gross loans with a maximum provision (because it is assumed the entire €2bn injection last week was applied to NAMA loss provisions), of €3bn ie 16%.

Has the Financial Regulator, Matthew Elderfield, abandoned his duties towards Anglo by apparently accepting a provision level which, from everything we have learned about the collapse in property values and the quality of paperwork and security at Anglo, would appear reckless?

UPDATE: 16th June, 2010, the Irish Times reports that the Regulator has not carried out his Prudential Capital Assessment Review of capital requirements for Anglo and INBS. Does this mean that the recent injections into Anglo (€8.3bn in December 2009 and €2bn in May 2010) have just been to keep Anglo solvent?

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