First AIB toxic loans transferred to Nama

ALLIED IRISH Banks (AIB), the State’s largest bank, has transferred its first tranche of loans to the National Asset Management Agency (Nama).

Loans with a nominal value of €3.29 billion were transferred yesterday in exchange for Nama securities with a value of €1.9 billion, according to a statement from the agency.

Nama applied a discount of 42 per cent to the loans. This was amended from a 43 per cent discount initially announced last week, when the agency said it would pay €1.88 billion for the AIB loans under the first tranche.

A spokesman for Nama said movements in foreign exchange rates were “primarily” the reasons for the changed amounts and discount on the loans.

This was because some of the properties on which loans were secured are in the UK, meaning their valuation was dependent on the sterling-euro exchange rate on the date of transfer.

There were also some technical queries over data provided on the loans.

The discount being applied to the first tranche of loans moving from the bank remains above the 35 per cent consensus estimate made by analysts before details of the Nama transfers were announced by the Government at the end of March.

AIB now faces the prospect of majority State ownership. The bank needs to fill a capital hole of around €7.4 billion by the end of the year in order to satisfy funding requirements laid down by the Financial Regulator.

Minister for Finance Brian Lenihan has instructed AIB to dispose of its overseas assets in order to raise part of the capital it needs.

MT, the US bank in which AIB has a 25 per cent stake, made strong gains on US stock markets yesterday on the back of expectations that the stake will be sold. AIB rose 4 per cent on the Iseq index to close at a price of €1.25.

It is expected that AIB will transfer a total of €23 billion in loans to Nama between now and the end of 2010, and by no later than the end of February 2011, the deadline set by the European Commission.

Nama has begun writing to the borrowers whose loans were transferred in the first tranche. The agency is asking the borrowers for detailed business plans for the assets on which the loans were secured. The borrowers have 35 days to respond.

AIB has now joined Bank of Ireland, EBS Building Society and Irish Nationwide Building Society in completing the transfer of its initial tranche of toxic loans to Nama.

Nama is paying a consideration of around €8.5 billion in exchange for loans with a book value of €16 billion under the first tranche of transfers, which relate to loans taken out by the 10 biggest borrowers.

This leaves Anglo Irish Bank as the last remaining Nama participating bank to make transfers to the agency. The State-owned bank is due to transfer loans with a book value of €10 billion by the end of April. The transfer had initially been scheduled for later this week, but has been delayed due to a higher degree of complexity in relation to the loan data.

Nama expects to complete the second tranche of transfers, which relate to the next 20 biggest borrowers, by the end of May or early June.