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Irish Finance Minister Michael Noonan

Ireland is on sale, and we’re cheap!

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Irish Finance Minister Michael Noonan

If you have a few billion in spare cash lying around, roll up, roll up, because Ireland is on sale. There are unbelievable bargains to be had.  

You won't see value like this again for a very long time.  Big chunks of a developed country on the block at knock down prices!  

Get in before it's too late!   It's the opportunity of a lifetime!  

That's not exactly the international sales pitch that the National Asset Management Agency (Nama) is using, of course, but the message is clear -- Ireland is on sale.  

The response has been extraordinary, both from some of the biggest capital investment funds in the world and from individual billionaires, some with Irish American connections.  Even the Saudis have been looking for a piece of the action.  All the big boys are piling in, buying up baskets of loans from Nama relating to office blocks, hotels, apartment complexes, even large bundles of home mortgages.    

Nama is Ireland's bad bank, set up in December 2009 after the financial crisis had peaked and our banks were on the verge of collapse.  The problem was that our banks had loaned out tens of billions to developers and speculators during the property boom, and when the bubble burst the loans could not be paid back.  

So part of the solution was to set up Nama which would take these bad loans off the books of the banks and then hold on to them until at least a partial recovery in property prices happened.  That's why it was called the National Asset Management Agency, the assets involved being mainly construction sites, buildings and development land.  

At the time people speculated that Nama might have to hold on to the loans for 10 or 20 years, or even longer.  The amount of money involved was truly mind boggling for a country of our size with a population the same as the city of Manchester in England.  

Nama bought around €75 billion in loans for which they paid the banks around €32 billion. The discount applied was the best guesstimate at the time of how much reduction was necessary to get down to the real value of the assets behind the loans.  

But it really was guesswork.  And it still is.  

The cost of the Nama process -- and the €60bn plus recapitalization of our banks -- was loaded on to Irish taxpayers via the IMF-EU bailout. We're paying for it through the massive repayments we have to make on that bailout debt.  

So the ordinary taxpayer here has skin in the game.  In fact the ordinary taxpayer here has been flayed alive with tax hikes and cuts in state spending to pay for the mess.  

For that reason the ordinary taxpayer has a legitimate interest in what is now going on with Ireland on sale -- and a legitimate right to be very angry about it. 

Minister for Finance Michael Noonan recently announced that there was now a real hope that much of Nama's work could be completed by the end of this decade -- in six years time -- and he seems to have directed them to aim for that. ‘

That would be much faster than had been originally envisaged when our property collapse was at its lowest point.   There has even been talk in official circles in the last few weeks about Nama eventually making a profit.   And this has been talked about with an air of satisfaction and self-congratulation, like it's a big achievement.  

When they look at the numbers, however, the taxpayers here are unlikely to see it that way.

The first thing to note is that when Nama talks about making a profit, that is based on getting back more than it paid for the loans, which was a total of €32 billion.  But the original loans were €77 billion.  And it's the taxpayer who has to pick up the tab for the difference.   

Money does not vanish.   In the end someone always has to pay.  And in this case, as so often happens, it is Sean Citizen.  

So there is now a lot of concern here about how cheaply these loans -- and the properties that come with them -- are being sold to international buyers. 

It's not just the 50 percent or more write down in the original loan value imposed by Nama when it took over the loans.  Anecdotally we are hearing that some of these assets and properties are being written down further as Nama tries to clear its books as fast as it can. 

In some cases, we are told, the bidding process may result in a small profit for Nama.  But in many others there is a significant loss.  

From the point of view of the minister and Nama it is possible to understand the urgency in selling off large chunks of Nama's assets.  

Global interest rates are at historic lows. So international investment funds and venture funds (or as we call them here, vulture funds) at the moment are desperately looking for a home for large amounts of money.  

Assets being sold off cheaply in a developed country like Ireland which is part of the EU are just perfect.  They offer a good chance of significant returns within a few years.   

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