Latest toxic loans also face 50% discount

THE SECOND tranche of loans heading for the National Asset Management Agency (Nama) are likely to face much the same discount as the 10 biggest developers whose loans have already been transferred, according to the agency’s chairman.

“The discount on the first tranche was 50 per cent,” Frank Daly said yesterday. “I don’t expect it to change enormously. Until we get the loans across, we won’t know the exact figure.”

Nama will begin transferring €3 billion in the second tranche of development loans going into the agency over the next few weeks. A further €.5 billion will be transferred in the third wave by the middle of the summer.

Last month the agency completed the transfer of the first tranche of loans from lenders.

Loans with a face value of €5.3 billion were purchased for €´7.7 billion, representing an overall discount of 50 per cent on the first tranche of purchases. This was higher than the 47 per cent discount estimated in March, largely due to a discount of 55 per cent on the first € 9.3 billion in loans from Anglo.

The banks had originally estimated that haircuts would be in the region of 25 per cent.

There had been some speculation that the discount applied to the second tranche of loans may have been less severe than that applied to the first tranche of loans. However, loans from state-owned Anglo Irish Bank account for more than half of all the loans being sold in the second tranche.

Speaking at the Certified Public Accountants (CPA) annual conference in Kildare yesterday, Mr Daly also said Nama would pursue developers for the full value of loans they owe to banks. It was “absolutely not the case” that Nama would absolve borrowers of their further obligations once it has recovered its outlay.

“Borrowers . . . will continue to be liable for the debts they have incurred,” he said. Mr Daly also questioned the role played by auditors in the recent banking turmoil.

“Those who carried out audits of the financial statements of these institutions must at the very least examine their performance before they can absolve themselves of responsibility,” he told delegates.

The notion that it was not the function of auditors to comment on the business strategies or ethical behaviour of their clients, also needed to be addressed, he said.

Responding to Mr Daly’s comments, CPA president Geoff Meagher said the auditing profession adhered to strict international rules which stipulate it was not the role of the auditor to comment on the business strategies or ethical behaviour of clients.

“These are matters for the company boards and ethical behaviour is also addressed through corporate governance codes,” he said.