NAMA to 'recover just €16bn out of €40bn spend on loans'
NAMA will only recover €16bn for the taxpayer on the €40bn it intends to spend on risky property loans from the banks, Standard & Poor's (S&P) has estimated.
The agency, which downgraded Ireland's credit rating on Tuesday, said that only €16bn (equal to 10pc of GDP) would be recovered based on information it had seen. It didn't elaborate any further.
The Government, on the other hand, hopes to make a full recovery of the entire amount.
S&P, which competes with agencies Fitch and Moody's, said the €16bn would be recovered "over the timeframe that our ratings address". The Irish Independent established yesterday that this was a reference to a five-year period.
The National Treasury Management Agency (NTMA) strongly disputed the S&P claims yesterday, saying the agency was effectively declaring NAMA assets to be worthless.
But the agency makes it clear this is not the case. Instead it is worried about the ability of NAMA to turn its assets into hard cash in a short space of time.
"In our view, the loans that NAMA is acquiring have limited liquidity and cannot readily be sold in the near term,'' S&P said.
Referring to the first batch of loans NAMA has taken over, S&P added: "We view these loans as having value, and as recoveries occur in the medium term we expect them to be available to pay down general government debt."
The NTMA and the agency seem to differ over when Ireland should be given credit for taking over the assets. S&P said that when sales actually take place "we may revise our ... estimates of Ireland's gross and net general government debt".
But the Government, the EU and the statistics agency, Eurostat, take a different view, allowing the Government to move NAMA and associated debt completely off the balance sheet. Instead of becoming a direct liability, it becomes a contingent liability, making the net debt figures for the country look better.
But S&P has a different approach and made it clear yesterday this method was also being applied to other countries, like Spain and Cyprus. "We deduct only those assets which we believe to be equivalent to cash," said the agency.
This emphasis on liquid assets, as opposed to harder-to-value property assets, was the main cause of disagreement between the NTMA and the agency yesterday.
S&P believes the ultimate haircut on NAMA assets will be 46pc, as opposed to its previous estimate of 45pc. It also thinks Ireland will have to borrow about €40bn to buy NAMA assets, as opposed to €43bn.
"We have adjusted this amount to take account of the fact that 5pc of NAMA's payment to the banks is intended to be in subordinated debt that has no recourse to the Government,'' it adds.
"NAMA's own business plan applies a discount of 50pc on the nominal amount of loans it expects to be transferred from the bank,'' S&P pointed out.
NAMA is currently working on moving its third tranche of loans out of the banks. The deadline is next February, when the EU has demanded that the process be completed.