Anglo has transferred a cumulative total of €16bn of its NAMA-bound loans in tranches 1 and 2, leaving an estimated €20bn in its remaining tranches if the estimates in NAMA’s revised Business Plan and accompanying tranche 2 detail are correct (what introduces some doubt is the claim two weeks ago by the Anglo CEO Mike Aynsley that €2-4bn of NAMA-bound loans in the UK and US may be “reclassified” in agreement with NAMA).
If tranches 1 and 2 are anything to go by, NAMA will in future pay Anglo a Long Term Economic Value (LEV) premium of 10-12% of the current market value of the loans. So if €20bn is still valid as the face value of the remaining Anglo loans and they have a current market value of 45% of their face value, then NAMA will be paying €0.9-1.1bn above the current market value of the loans. That is a substantial sum of money to be gifting a bank whose future is being debated as we speak at the EU with a European preliminary view on the future of Anglo due in weeks.
The perpetual murmurs of disquiet about Anglo have grown substantially in volume this week. Standard and Poor’s downgrade of Ireland’s credit rating was predicated in part on their assessment of the increased cost of bailing out Anglo at €35bn. Last week in Beijing the Governor of the Central Bank broke the news that “Anglo may impose a NET [my emphasis] cost to the Government of about €22-€25 billion”. A net cost of course could be a gross cost of €35bn with €10bn recouped over time (eg through sale of a government stake in Anglo’s Newbank, redemption of NAMA bonds at face value rather than the accounting value which might assume a large discount). Trinity College economics professor Constantin Gurdgiev repeated his view that Anglo could incur losses of “€33bn in mid-range case, rising to €38.6bn in the worst case scenario”. It is not clear if these losses equate to a net cost to the State as there may already be provisions for these losses and Anglo has a (small) capital base. Today in the Irish Times, former Ulster Bank chief economist Pat McArdle suggests that, in an attempt to improve Ireland’s credit rating “we could try to give greater certainty regarding the Anglo bailout cost, possibly by postponing all other transfers to Nama until Anglo is taken care of.” Other calls this week came from the domestic politics (FG’s Finance spokesman, Michael Noonan calling for a debate at balance sheet level to assess the different options for Anglo) and the Financial Times editorial which today says “it is time to staunch the bleeding. As Irish state guarantees near their expiry date, some banks will not be able to refinance their balances. The government should prepare insolvent banks for forced debt-for-equity swaps, which would instantly recapitalise the banks in question and cap the government’s exposure”. This blog has expressed concerns about the non-NAMA losses at Anglo and whether these are being realistically assessed at present.
Last weekend NAMA paid Anglo a LEV premium of €270m on its latest tranche of loans, a considerable gifted sum in normal times but small in comparison with the expected €1bn of LEV premiums on the remainder of Anglo’s NAMA loan book. Has the tipping point now come whereby Anglo’s future is consensually decided (consensus impedes speed of action but the sums involved have grown to state of war proportions for the Irish state)? And until Anglo’s costs are clarified, should NAMA put the transfer of future loans on hold as these future transfers will involve the State paying substantial sums in excess of the true value of the loans.
NAMA Wine Lake 
Comment:
We did not have to wait for the past 18 months to expire to suddenly find out that NAMA was going to end up paying way over the odds for the various toxic assets from the Banks, never mind the Crap it was getting from ANGLO IRISH BANK
The simple fact is that from the start we the ordinary Joe soaps could smell that a sweetheart deal was been done by the Fianna Fail Government with the establishment of what is now openly been acknowledged as the largest bail out in Irish corporate history and all for the benefit for the golden circle, the chosen few, the cronies and leaches and hangers-on of the Fianna Fail party
This is now seen as a fraudulent transfer of wealth from the citizens of Ireland to a group of irresponsible gamblers, with the help of economic traitors within the government and a totally incompetent regulatory authority that at this stage one must ask if it was designed to be so, in order to facilitate this fraud in the first place
I t is the duty of every citizen to make sure that the next tranche 3 of toxic loans from Anglo Irish Bank should not take place and indeed a independent international enquire should be set up to investigate exactly who were the beneficiaries of the billions that have already gone into this toxic Toilet, who was responsible for the ludicrous high valuations put on these worthless toxic assets and weather there was a conflict of interest at any level
The Fraudulent actions of Government minsters to be exposed and all individuals brought before the courts and jailed on convictions, no golden handshakes or beefed up pensions to be paid out to any individuals found to have felicitated in the cover-up of fraudulent actions or helped to hide relevant information that would have expose this monstrous fraud on the Irish taxpayers
This continued drip ,drip feed of lies must be stopped and the truth must be put before the people
In the form of a general election or a referendum on the issue
I call on all the opposition parties to declare that they will not honour any of the fraudulent guarantees given to the international bondholders by way of an extended government guarantee given in the first place without the consent of the Irish people
I dispute the authority of any government to place me and the hundreds of thousands of its citizens into a kind of financial enslavement to corrupt financial instustions that then are enabled to legally rob me of my family home, my savings, and my prosperity as a consequence of their corrupt practices.
As a result of the establishment of NAMA the countries financial instustions have effectively sucked dry the financial resources of the country for the next generation.
Thus robbing me and the majority of the countries citizens the necessary means to independently provide for their family s and so forcing families to become dependent on the state for handouts
These actions are a clear breach of the rights guaranteed to every citizen of Ireland by the Irish constitution and so renders the establishment of NAMA illegal without first haven put it to a referendum to the citizens of Ireland
At last…. an eminent publication such as the FT has actually come down firmly on the side of Peter Mathews, who has proposed exactly this flawless and “on the money” (no pun intended) solution to all and sundry for the past 12 months.
It always amazes me how long it takes for our “leaders” to grasp the obvious. We may now actually get the “Fahy” faction and the other arrogant but basically stupid pseudo politicians to drop the party line spin and listen to some intelligent advice.
Congratulations and thanks are due to Peter Mathews for sticking to his guns at considerable personal cost and no gain to win this very important argument.
I think you’re referring to Peter Mathews’ approach which he sets out in some detail at
http://bankermathews.com/the-alternative/
Certainly aspects of the FT editorial seem supportive eg the debt for equity swap. Perhaps the man himself might respond to the FT article.
P.S. A pity it cost an unnecessary €16 to €20 billion before the penny dropped!
Quote=Thomas>>”I call on all the opposition parties to declare that they will not honour any of the fraudulent guarantees given to the international bondholders”<<
Uhhh, what if the "international" bondholders aren't quite as international as you'd like and are a bit more "national"… and what if they happen to be of the pension fund, banking and insurance company variety… what happens then exactly?
"The fault, dear Brutus, is not in our stars, but in ourselves…"
He put it fairly succinctly here:
“What should, of course, now happen (it should have happened soon after the Blanket guarantee was put in place) is that Bondholders in the 3 institutions should be directed by the State to contribute to this re-cap at a level of say €6.5bn in appropriate proportions. [As part of this restructuring, the State might offer bondholders a small (token) debt for equity swap]. The State would invest the balance of €11bn by way of a State Banks Re-Cap Bond issue (zero coupon).
The State’s earlier investments (€3.5bn each to AIB and BoI) plus the “fresh” €11bn, making a total of €18bn, would be more than recovered with a profit / gain in 5 years time by sale of the investments in the 3 institutions. An undemanding €3.5bn – €4bn level of normal maintainable annual profits for the combined 3 institutions multiplied by a 6.5 times Price / Earnings (P/E) multiple gives a valuation range of €22.75bn – €26bn. All three viable banks would thus be transparently and successfully nationalised temporarily (5 years) for the purposes of their full rehabilitation / re-booting.”
An analysis of the p.e. of listed banks will show that he is very conservative with his 6.5 multiple. History shows that the mean is closer to a multiple of 10.