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Archive for July 26th, 2010

In its quarterly survey of the opinions of Chief Financial Officers, Deloitte today reveals that confidence in NAMA’s ability to restore credibility and integrity to the banking sector is on the rise with 55% of respondents expressing positive views on NAMA’s impact compared with 51% in the previous quarter and on the narrower question of NAMA’s effect on increasing the availability of credit to business, the number went up to 66% from 60% previously.

On the question of property valuation, CFOs were asked their opinions on valuations of commercial property and although the majority still think commercial property is overvalued, the % thinking it is undervalued is now 22%, up from 15% in the previous quarter – a glint of hope for commercial property prices?

The CFOs surveyed are those at listed companies, large (undefined) companies and Irish subsidiaries of overseas multinational companies.

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Like some beancounter’s version of the dance of the seven veils, a NAMA source has revealed another flash of Anglo flesh to the Sunday Tribune – that the haircut on Anglo’s Tranche 2 will be in the high 50s. This prediction was also voiced by “valuation sources”. With Anglo’s nominal Tranche 2 loans still estimated at €8bn, that translates into a loss of up to €4.8bn. According to the Sunday Tribune this is giving rise to fears that Anglo will need another recapitalisation – a prospect raised here last week but denied by NAMA who said the delay with Anglo was solely related to loan paperwork and nothing else, though yesterday’s Tribune says the delay is now down to “the complexity of the structures used by the bank when they were issuing the loans and the initial delay in transferring loans belonging to tranche one”. Anglo’s Tranche 2 is now expected to be transferred to NAMA by the middle of next month according to the Tribune.

Let’s recap on the timeline for the approval of Anglo’s restructuring plan submitted to the EU at the end of May 2010. According to Mike Aynsley, Anglo CEO, he expects the EU response at the end of July or beginning of August. And Anglo are looking for approval for the injection of up to €22bn of our money – they’ve had €14.3bn (€4bn last year and injections of €8.3bn and €2.0bn announced this year) so far and they only have approval for another €0.14bn. Brian Lenihan broke EU State-aid rules when he wrote to Anglo in December 2009 giving commitments which the EU had not approved – he should now have learned his lesson in that regard.

Despite NAMA’s denials – and having regard to what Anglo termed “factual errors” in NAMA’s assurance to Paddy McKillen that Anglo has not raised objections to transferring Paddy’s loans on the grounds of eligibility – it seems probable that Anglo will need a further recapitalisation when Tranche 2 is transferred (see the background numbers in last week’s post). And because there has not been EU approval of the Anglo restructuring plan, that might be the reason Anglo’s Tranche 2 is not being transferred now. Of course Anglo may not need a recapitalisation of the full €4.8bn because of potential profits in other parts of the Anglo empire,  though it may need more because of unreported losses on the non-NAMA portfolio – it is hard to imagine that the €0.14bn undrawn approval would be sufficient to absorb the losses in Tranche 2.

For the many people who are calling for Anglo to be shut down or the pouring of money into the Anglo black hole to be abandoned, now is the time to act. In a matter of weeks, protests may be academic because the money may have been largely spent.

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