Glass bottle site given 87% Nama 'haircut'

 

THE NATIONAL Asset Management Agency (Nama) has applied a “haircut” of 87 per cent to the loan provided by Anglo Irish Bank to buy the controversial Irish Glass Bottle site in Ringsend, Dublin in a €412 million transaction in 2006.

The loan will be among the first tranche of €10 billion in assets moving to Nama from the State-owned bank next weekend. Anglo and Nama had no comment to make the haircut or the transfer.

The discount reflects the collapse in the value of the property, which was written down to €50 million by the Dublin Docklands Development Authority (DDDA) – a drop of 88 per cent in value.

Anglo and Allied Irish Banks provided a €288 million loan to fund the purchase of the site, which involved developer Bernard McNamara, financier Derek Quinlan, the DDDA and private investors of Davy stockbrokers.

One of the three draft internal reports into the DDDA, which were recently disclosed, reduced the value of the authority’s 26 per cent share in the site to zero.

The discount on Anglo’s loan contributed to Nama applying a 50 per cent overall discount on its first loans being moved into Nama.

The bank reported a loss of €12.7 billion for the 15 months to the end of December this week after writing off €15.1 billion in bad loans, including €10.1 billion on loans moving into Nama.

The Government has injected €12.3 billion into Anglo to replenish its reserves after the losses wiped out its capital base.

The bank has said that it may need a further €10 billion and possibly more to cover a higher-than-expected average haircut on the loans moving into Nama as well as losses on non-Nama loans and to meet the new higher capital rules.

Nama said yesterday it had completed the transfer of the first loans from Bank of Ireland, buying assets with a face value of €1.93 billion for €1.26 billion, representing a discount of 35 per cent.

“The agency expects to complete the transfer of the remaining loans from all five institutions by the end of the year and no later than end February 2011, the deadline set by the EU Commission,” Nama said in a statement.

The agency has now bought loans with a face value of €2.74 billion from three financial institutions – €1.93 billion from Bank of Ireland, €670 million from Irish Nationwide building society and €140 million from EBS building society. The agency has applied a 37 per cent discount against the EBS loans and a 58 per cent haircut to Irish Nationwide’s.

Nama will acquire the first loans from AIB over this weekend, buying loans with a face value of €3.3 billion for €1.9 billion, representing a haircut of 43 per cent. Anglo will transfer some €10 billion in loans for €5 billion.

Some €16 billion in loans are being transferred to Nama in the first tranche for €8.5 billion, representing an average haircut of 47 per cent across the institutions.

The State effectively took control of Irish Nationwide this week with the injection of €100 million in return for special investment shares in the building society.

EBS is expected to find out over the coming week about when the institution will receive its special investment shares. However, the building society last week received a waiver, allowing EBS to fall below the threshold which dictates the minimum amount of capital that a lender must hold in reserve.

EBS has the derogation from the regulator until May 31st, allowing it to hold less than the minimum core tier 1 capital ratio – a measure of loss-absorbing reserves at a lender – of 4 per cent.