Seems AIB can do better than NAMA

Based on the Minister’s statement to the Dail today, it would seem that AIB, and maybe also BOI, can do better than deal with NAMAAIB logo

The Minister will “buy” in total  €47 bn. of assets at “current market value” (CMV), and then pay an extra 7 bn on top in “subordinated “bonds. That’s 54 bn out of a total of 77 bn assets at book value. About a third of the assets, at book value, will come from AIB. We might expect that AIB’s assets will be “bought” for c. 15 bn and 1 bn extra in subordinated bonds. (Actually, we might expect AIB’s assets to be higher quality than Anglo’s or INBS’, in reality, but ignore that for now). AIB will then be paid for these assets sometime in the future but will earn interest at 1.5% per annum in the meantime…say €240 million per annum, and they hold the risk that the government will return their 16 bn assets in cash form some day

But if these assets are truly worth only 15 bn, (current market value), then  perhaps AIB should sell them privately for that amount and then lend the proceeds to the government, charging the current Irish government risk-related international bond interest rate of 4.5%?  They’ll still carry the same risk that the government will return the cash to them some day. This option would bring them in 675 million per annum, much more than the Minister’s offer, and ‘twould be greatly welcomed by distressed shareholders. That’s about 4 billion extra over ten years,  (and is some indication of the subsidy of the State by the bank shareholders – 150,000 Moma and Pop Irish citizens-  implicit in the NAMA deal)

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