Business Irish

Saturday 24 June 2017

BoI, Nationwide dispute severe NAMA discounts

Loan transfers cut as bank borrowers refinance with other UK lenders

Bank of Ireland: loan transfer to NAMA reduced. Photo: Bloomberg News
Bank of Ireland: loan transfer to NAMA reduced. Photo: Bloomberg News

Emmet Oliver and Joe Brennan

Bank of Ireland and Irish Nationwide are the two lenders disputing the first loan notifications sent out by NAMA amid indications that the society's discount on its first tranche will top 40pc.

The Irish Independent has also learnt that the reduction in loans Bank of Ireland is transferring to NAMA, from €16bn originally to €12bn, is partly down to borrowers in the UK refinancing loans with other banks to avoid being included in Ireland's 'bad bank'.

Security on several sizeable loans has been described as inadequate by NAMA and as a result these loans have attracted severe discounts.

Contesting

The banks are now contesting these, but NAMA has insisted the discounts must remain unless the banks can produce new documentation showing the loans have been properly secured.

It is understood NAMA has told some banks that the security underpinning their loans still needs clarification and without this the larger discount will remain. The banks also have a long-term appeal mechanism they can use.

It is understood that the discount on the first tranche of loans for Irish Nationwide and Anglo Irish could be as high as 50pc, although Anglo Irish has not received a notification or "acquisition schedule'' yet.

Bank of Ireland is facing a discount of between 35pc and 40pc on loans it is transferring, which it is understood that EBS's haircut is in the region of 35pc.

"If the haircut at BoI is shaping up at 35pc to 40pc, then one wonders about the likely haircut for AIB given it has a higher proportion of development loans in its mix," said Eamonn Hughes, analyst with Goodbody Stockbrokers. "This has the potential to make one nervous about the average 35pc haircut we have applied on AIB's NAMA-bound loans."

Valuations

Irish Nationwide's valuations have been hit in particular by the fact that it took equity stakes in many of the deals it bankrolled, according to sources.

The strategy served to bolster Irish Nationwide's results in the boom days, but have come back to haunt it following the collapse of the property market.

None of the banks were yesterday prepared to speak publicly about the problems with the first notifications. One senior source however said: "This is part of the normal cut and thrust you get when there is a major transaction''.

Opponents of NAMA have also raised concerns over the timeline being used to value NAMA loans. Karl Whelan, the UCD economist, yesterday drew attention to the decision to value loans at November 2009, rather than later when prices have in most cases declined further.

Irish Independent

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