–Discount Deeper Than 30% Expected by Market
BRUSSELS (MNI) – Ireland’s government bought the first batch of
bad property loans from the country’s banks on Tuesday at a deeper
discount than expected, as it attempts to free up the banking system and
kick-start lending, a process expected to cost E81 billion.
The National Asset Management Agency (NAMA) said it will pay E8.5
billion to acquire more than 1,200 loans with a nominal value of E16
billion. That represents an average discount of 47%, the agency said.
The average 47% discount is higher than the market was expecting,
with officials briefing that the discount would be around 30% about a
month ago.
A frozen banking system and the reversal of a 10-year property boom
pushed the Irish economy into a deep recession which it has yet to
exit. Gross domestic product shrank 7.1% in 2009, according to official
data, and is forecast to shrink again this year.
The Irish government’s scheme, known as the National Asset
Management Agency, aims to rid the country’s five main banks of their
“toxic assets” or property loans that are unlikely to be repaid, by
buying them at a discount to get them off the banks’ balance sheets.
Most of the bad loans were bought from Anglo Irish Bank, where NAMA
paid E5 billion for E10 billion worth of loans, a 50% discount. Other
loans were bought from Alied Irish Banks PLC, Bank of Ireland, Irish
Nationwide Building Society and ESB Building Society, a statement on the
NAMA web site showed.
NAMA expects to complete the transfer of the remaining loans from
all five institutions by the end of the year and no later than end
February 2011, the statement said. It said it anticipates to buy E81
billion of loans in total.
NAMA will exchange the bad loans for government bonds that they can
use as collateral at the European Central Bank.
–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com
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