# How much will developers pay NAMA?



## Shawady (21 Aug 2009)

Will developers owe NAMA the amount NAMA paid for the loans or the amount they originally owed the banks?

For example, if a developer owed a bank 1 billion for assets worth 250 million, and NAMA bought the assets for 500 million, would they have to pay NAMA 500 million or 1 billion?


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## Latrade (21 Aug 2009)

Shawady said:


> Will developers owe NAMA the amount NAMA paid for the loans or the amount they originally owed the banks?
> 
> For example, if a developer owed a bank 1 billion for assets worth 250 million, and NAMA bought the assets for 500 million, would they have to pay NAMA 500 million or 1 billion?


 
The developer's loans stay the same. The terms and conditions stay the same. So if they if the loan with the bank is 1 billion, the loan with NAMA is 1 billion.

I don't see how in some media circles they're painting this out to be a bail out for the developers as well as the banks. The developers are still up the creek, it's just a different person who'll be sending the nasty letters.


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## brickwall (24 Aug 2009)

Latrade said:


> The developer's loans stay the same. The terms and conditions stay the same. So if they if the loan with the bank is 1 billion, the loan with NAMA is 1 billion.
> 
> I don't see how in some media circles they're painting this out to be a bail out for the developers as well as the banks. The developers are still up the creek, it's just a different person who'll be sending the nasty letters.


 yes but i bet the developers would prefer too owe the government rather than the banks, government and developers like a married couple they will soon enough be back in bed together.


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## huskerdu (24 Aug 2009)

brickwall said:


> yes but i bet the developers would prefer too owe the government rather than the banks, government and developers like a married couple they will soon enough be back in bed together.



This is one of the major points which makes people rightly spectical / cynical about NAMA. Only time will tell how aggresive NAMA will be as a lender with their defaulting customers ( which will be 100% of their loan book). 

They should hound them for ever for the money they owe. 

Mind you, even if they do, in a large number of cases, the default amount is so large that it can never be repaid, even if the developer is left with nothing but the clothes he is wearing.


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## Bronte (25 Aug 2009)

Latrade said:


> I don't see how in some media circles they're painting this out to be a bail out for the developers as well as the banks.


 
And where exactly are the developers going to get this money to pay back their loans?


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## sunrock (25 Aug 2009)

Just out of interest,is the money owed by the developers secured on any of their private assets or is it all secured just on their sites and unsold properties.
I suspect the latter and thus I suppose the developers can happily sit this out,eventually declare themselves bankrupt and start again.....this then is their worst possible scenario and you have to admit its not too bad for a "shot to nothing" as they say in snooker.
I presume they have accumulated enormous wealth during the good days or squirreled it away as they saw the downturn coming but this money is beyond the reach of NAMA.


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## Purple (25 Aug 2009)

sunrock said:


> Just out of interest,is the money owed by the developers secured on any of their private assets or is it all secured just on their sites and unsold properties.
> I suspect the latter and thus I suppose the developers can happily sit this out,eventually declare themselves bankrupt and start again.....this then is their worst possible scenario and you have to admit its not too bad for a "shot to nothing" as they say in snooker.
> I presume they have accumulated enormous wealth during the good days or squirreled it away as they saw the downturn coming but this money is beyond the reach of NAMA.



I suspect it would be quite easy to prove wreckless trading and so remove any limited liability that they may have.


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## Brendan Burgess (25 Aug 2009)

It will differ from customer to customer and from bank to bank.

Some lending is non-recourse lending i.e. it is secured only on the asset the money was borrowed for.

But in most cases, personal guarantees have been given. That is one of the reasons for setting up NAMA.  All the banks and properties are tied in to each other through guarantees and the same property being given as security for different bits of loans. 

Brendan


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## Guest116 (25 Aug 2009)

Bronte said:


> And where exactly are the developers going to get this money to pay back their loans?


 
Yep, that is the big issue for a x% of the loans. Eventually NAMA will take ownernship of the assets and evetually (hopefully) sell them at a good value and make some profit for the taxpayer. This is going to take 10+ years.


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## sunrock (25 Aug 2009)

What is NAMA going to do with these properties?Are they going to try to rent them out until the prices rise?


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## Bronte (26 Aug 2009)

Purple said:


> I suspect it would be quite easy to prove wreckless trading and so remove any limited liability that they may have.


 
You do not seriously think that any developer will be taken to court for wreckless trading nor that they will lose their personal wealth or property?  This is Ireland you know.


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## dingbat (26 Aug 2009)

aristotle25 said:


> Yep, that is the big issue for a x% of the loans. Eventually NAMA will take ownernship of the assets and evetually (hopefully) sell them at a good value and make some profit for the taxpayer. This is going to take 10+ years.



Have you been drinking?


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## Purple (26 Aug 2009)

dingbat said:


> Have you been drinking?



Have you read what NAMA is doing?


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## paddy26 (26 Aug 2009)

I think in nearly all cases there will be some level of personal guarantees. I know all the big Irish guys were doing this in certainly 2007 and 2008


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## paddy26 (26 Aug 2009)

Nama will not own the properties they will own the debt. If the debt defaults Nama will foreclose on the asset and either sell it or rent it. Any shortfall they will pursue the developer for based on cross collateralisation or PG's.  I think the media are making this out to be something it is not. The developers still have the debt and have to repay in the same way.

The reason for NAMA is to take these loans off the books of the banks as NAMA can take a long term view  (ie if it forecloses on a unperforming loan it can hold the asset rather than having to fire sell it as the bank would need to do).


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## dingbat (26 Aug 2009)

Purple said:


> Have you read what NAMA is doing?



I know quite well what NAMA is doing, it's going to put me, you, my kids & your kids in hock to the markets for the next 30 years, until the next boom comes along (The last one being the early 70's). T

There is no basis in fact for the 10 years before these loans become solvent again.

The only winners out of this are the bond holders. 

The banks loaned the Developers the money, the bondholders loaned the banks the money, the insurance industry provided the CDs to cover the bonds, at no point do I see the government (Taxpayer) in this equation & frankly I dont see it as our mess to clean up.


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## canicemcavoy (26 Aug 2009)

Latrade said:


> I don't see how in some media circles they're painting this out to be a bail out for the developers as well as the banks. The developers are still up the creek,* it's just a different person who'll be sending the nasty letters*.


 
Yes, but that's the point. This "different person" will be a government agency, essentially a bank, founded by Fianna Fail and whose valuation committee will be chosen solely at the discretion of a Fianna Fail minister.

Sorry, but anyone who thinks that such a body will have a completely objective stance on getting money out of those who have largely funded the Fianna Fail party over the years... well, the best I can say is that I would like to live life that naively; it must be rather blissful and I imagine good for one's blood pressure.


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## dingbat (26 Aug 2009)

Perhaps somebody could correct me on this if I'm wrong:

If we borrow 70 Billion at 2.5 percent, this works out at 1.8 billion a year in interest payments, if the fanciful 10 year turn around comes to pass and frankly I dont believe it will, if we pay the 70/80% value for the loan books, are we not in fact paying face value for the loans over that time period?


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## paddy26 (26 Aug 2009)

dingbat said:


> Perhaps somebody could correct me on this if I'm wrong:
> 
> If we borrow 70 Billion at 2.5 percent, this works out at 1.8 billion a year in interest payments, if the fanciful 10 year turn around comes to pass and frankly I dont believe it will, if we pay the 70/80% value for the loan books, are we not in fact paying face value for the loans over that time period?


 
I dont understand how the annual interest cost would have anything to do with the capital value. 

By the way the cost of borrowing would be nearer 5%. The point Alan Aherne was making was that the interest paid on these loans by the developers would pay the interest NAMA would be paying on the Govt bonds issued


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## paddy26 (26 Aug 2009)

In relation to the bondholders. If we nationalise the banks there liabilities are still there under the govt guarantee for certain types of bonds so the tax payer is on the hook either way


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## paddy26 (26 Aug 2009)

A quick question. If we nationalise the banks can those banks still swap the govt debt they are issued with (in payment for the bad loans) for cash at the ECB?


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## Purple (26 Aug 2009)

dingbat said:


> I know quite well what NAMA is doing, it's going to put me, you, my kids & your kids in hock to the markets for the next 30 years, until the next boom comes along (The last one being the early 70's). T
> 
> There is no basis in fact for the 10 years before these loans become solvent again.
> 
> ...


 I agree with all of that but we are where we are. I'd like to see lots of people in prison for the next 40 or so years but that won't sort out the mess they created.
The international investors are the winners but the bottom line is that we need them more than they need us.


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## paddy26 (26 Aug 2009)

canicemcavoy said:


> Yes, but that's the point. This "different person" will be a government agency, essentially a bank, founded by Fianna Fail and whose valuation committee will be chosen solely at the discretion of a Fianna Fail minister.
> 
> Sorry, but anyone who thinks that such a body will have a completely objective stance on getting money out of those who have largely funded the Fianna Fail party over the years... well, the best I can say is that I would like to live life that naively; it must be rather blissful and I imagine good for one's blood pressure.


 
If they operate it separately like for example the Revenue Commissioners this may work


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## canicemcavoy (26 Aug 2009)

paddy26 said:


> I dont understand how the annual interest cost would have anything to do with the capital value.
> 
> By the way the cost of borrowing would be nearer 5%. The point Alan Aherne was making was that the interest paid on these loans by the developers would pay the interest NAMA would be paying on the Govt bonds issued


 
But none of the developers are even paying interest anymore, never mind the capital:

http://www.independent.ie/national-...n-interest-payment-by-developers-1622498.html



> A HIGH-PROFILE developer has accused Finance Minister Brian Lenihan of "not telling the truth" over claims that the majority of developers were making interest payments to Anglo Irish Bank.
> Mick Wallace of Wallace Construction said yesterday that he, along with a number of other developers, could not afford to pay their loan interest.




Why would NAMA be better at, er, persuading them to pay interest than a private bank?


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## paddy26 (26 Aug 2009)

canicemcavoy said:


> But none of the developers are even paying interest anymore, never mind the capital:
> 
> http://www.independent.ie/national-...n-interest-payment-by-developers-1622498.html
> 
> ...


 
Then they would default on the loan and NAMA would cease the property and either sell it (unlikely due to current values) or rent it and use the proceeds to pay the interest.  Development land may be more difficult but due to the level of cross security on a lot of this stuff there may be income producing assets in the pot. It is difficult to speculate without know the terms and security of each individual loan


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## canicemcavoy (26 Aug 2009)

paddy26 said:


> Then they would default on the loan


 
That still negates Ahearn's rebuttal that "interest paid on these loans by the developers would pay the interest NAMA would be paying".

So, NAMA would end up seizing land it can't sell. And we already know that developers were using the same assets for multiple loans, the assets seized will cover only a small fraction of the loan value.


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