My understanding of the transfer of deposits to AIB means that the end result is that AIB ends up with 12.2 billion worth of NAMA bonds as assets having accepted 8.6 billion worth of liabilities (the deposits) and having paid 3.6 billion in cash.
However there seems to be confusing interpretations of the deal; some have claimed it improves AIB's balance sheet by 1.6 billion but I don't see how. In fact it is Anglo's balance sheet which has improved since apparently it values NAMA bonds at 84.5% while the same bonds have been accepted by AIB as part of the exchange valued almost at par. Anglo got rid of 8.6 billion worth of liabilities and gained 3.6 billion worth of cash (total 12.2 billion) in exchange for assets it had valued at 10.2 billion
The overall effect is to improve the balance sheets of the Irish banks by transferring bonds which are valued at 84.5 of par value from one balance sheet to another balance sheet where they are valued at par.
If AIB were to discount the value of the NAMA bonds it has received (which it probably should - how can such bonds be valued at par when you can purchase Irish government bonds paying a higher interest rate for less?), then its balance sheet looks 1.8 billion worse after the deal.
In other words I don't see why the deal gave AIB's share price a boost unless the markets were already pricing in a worse deal. Or why the general consensus seems to be that it was a good deal for AIB. Have I missed something?
However there seems to be confusing interpretations of the deal; some have claimed it improves AIB's balance sheet by 1.6 billion but I don't see how. In fact it is Anglo's balance sheet which has improved since apparently it values NAMA bonds at 84.5% while the same bonds have been accepted by AIB as part of the exchange valued almost at par. Anglo got rid of 8.6 billion worth of liabilities and gained 3.6 billion worth of cash (total 12.2 billion) in exchange for assets it had valued at 10.2 billion
The overall effect is to improve the balance sheets of the Irish banks by transferring bonds which are valued at 84.5 of par value from one balance sheet to another balance sheet where they are valued at par.
If AIB were to discount the value of the NAMA bonds it has received (which it probably should - how can such bonds be valued at par when you can purchase Irish government bonds paying a higher interest rate for less?), then its balance sheet looks 1.8 billion worse after the deal.
In other words I don't see why the deal gave AIB's share price a boost unless the markets were already pricing in a worse deal. Or why the general consensus seems to be that it was a good deal for AIB. Have I missed something?