Monday 22 January 2018

Nama to miss March deadline for transfer of toxic assets

Wrangle with bad bank Nama over discounts on loan book causes delay

TRANSFER: March deadline was set by Brian Lenihan
TRANSFER: March deadline was set by Brian Lenihan

DANIEL McCONNELL Chief Reporter

THE State's bad bank Nama is set to miss an end of March deadline amid wrangling over valuations with several of the country's banks, the Sunday Independent has learned.

The further delays will be an embarrassment to Finance Minister Brian Lenihan, who explicitly laid down the deadline for the transfer of the assets from Anglo Irish Bank to Nama.

The process is now already several months behind schedule and sources close to the project estimate the taxpayer will have to inject as much as €15bn in to the banks.

Anglo, which is set to release its accounts detailing huge losses of up to €14bn before the end of the month, will need as much as €8bn of capital from the taxpayer; while AIB and Bank of Ireland could need a further €7bn between them, sources said.

There had been growing anticipation that the transfer of the so-called Anglo 10 assets would commence this week, but Mr Lenihan's spokesman yesterday ruled that out.

He said that the process is difficult and complex and will now occur the following week.

Economist Ronan Lyons in a new paper on Nama said that discounts will be far higher than previously thought and, contrary to Mr Lenihan's contention that Nama would have to accrue 10 per cent in 10 years, it will have to bounce back 25 per cent at least to break even.

Mr Lyons said the 10 per cent in 10 years argument is "increasingly risible" and warned that Nama is based on overly optimistic property yields, or rental profits.

He said that if Nama inflicts a realistic valuation on the assets, the banks will be so starved of cash that nationalisation of the entire sector may become inevitable.

Last week, Anglo announced that Donal O'Connor would step down as executive chairman at the end of June to be replaced by former Finance Minister Alan Dukes, currently a non-executive director of the bank.

Nama, led by Brendan McDonagh, last week sent out what are called "acquisition schedules" to the Bank of Ireland, the EBS and Irish Nationwide.

These schedules list the assets to be transferred, their values and how these values are calculated.

Once the assets are transferred over to Nama, the banks will have a 28-day period to present a business plan to Mr McDonagh's organisation. They will be able to correct errors in the documentation during that period.

There are also procedures for the banks to object to the inclusion of particular assets in the schedules and even object to the valuations themselves.

At least two institutions are said to be digging in their heels on the valuations, while another is said to be unhappy over the scheduling of the transfer. Senior government sources said yesterday that some banks are unhappy with the kind of discounts being proposed for the first batch of Nama loans.

It is known that discounts are considerably above the "nominal'' 30pc figure given by Mr Lenihan last year.

Anglo and Irish Nationwide remain the institutions expected to take the largest discount on their loans. Both institutions may yet have to live with a 40 per cent discount on the book value of the loans being transferred to Nama.

Confirmation of that level of discount will crystalise fears for the need of €15bn capital injection from the taxpayer.

Sunday Independent

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