Let's start with the €100 billion of property development loans. We'll be optimistic and say the loss here will be one-third. Remember, Anglo has already owned up to losing about €25 billion of its €75 billion portfolio, so we have almost reached that third without looking at AIB and Bank of Ireland. I think the final loss will be more than half, but we'll keep with the third to err on the side of optimism.
Aren't we buying the loans after the recognition of the loss? So we're paying 75B for a 100B portfolio? (Actually, the write-down NAMA is taking is much more than that - more like 60B for a 100B portfolio.)
Is Kelly positing an overall 70% loss in loan value on a portfolio that's pretty mixed and includes big foreign productive assets?
In have to agree its not clear from his text, but then his article takes Nama as a given and is looking at the what the total Government debt will look like in the next year or so before much, if any, value has been extracted from the Nama portfolio.
What he is saying is borrowing €100 Billion isn't such a problem if you are getting €100 billion assets in return even though popular discourse on state balance sheets tend to only look at the debt side of the balance. It is our inability to finance and service that debt by (in part) selling of assets or accruing revenue from those assets that is the problem from a debt service/repayment/affordability point of view. Frank's Home Page and Diary Index
