In a response penned, most likely well in advance of the Supreme Court decision, the DofF stated that (quoting the Irish Times report - here): "The Department of Finance rejected any suggestion that the Government’s plans for Nama were affected by the court ruling. “It makes no difference – Nama will proceed as planned,” said a spokesman for the Minister for Finance. “We’ve always made clear that Nama will operate in line with EU Commission guidelines, which set out the use of the long-term economic value measurement.”
So Supreme Court telling the nation that, in agreement with the Commercial Court, its assessment of Mr Carroll's assets is that these assets are not worth even 15-20% of loans advanced to the company, 'makes no difference' to the NAMA. We will still pay Euro60bn for the same assets.
Now, do the math, Mr Carroll owes the banks over Euro2bn. He has trouble paying on Euro136mln. His companies are generating around Euro27-30mln per annum - and that according to his company records, that Commercial Court, in the context of his the survival plan, identified as “lacking reality” and bordering, if not trespassing, on the “fanciful”. So here we are, the valuations of Mr Carroll's loans quality is in (this time confirmed by the highest authority in the land):
- According to the courts, Mr Carroll's loans are not worth 21.3% of their face value (in other words, a discount of 78.7% on their value will not bring the price down to the current market valuation) (Euro265mln out of Euro1.26bn = 21.3% value of assets);
- The balance sheet below illustrates clearly that even assuming 7% annual cash flow growth, plus 5% asset growth per annum for 2008-2020, a very benign interest rate environment (note we assume max cycle interest rate of 10% on Mr Carroll's borrowings in Scenario 2) and disposal of all his properties in the end of the term, the net market value of Mr Carroll's companies in 2020 will be a negative Euro5.7-7.5bn.
Now, it is the only attempt of estimate Mr Carroll's loans net worth at this stage known to me, so do take your time to read through it. The really, really scary part, that if NAMA were to buy his loans at a 50% discount, NAMA will be making a cumulative loss of between Euro2.41-2.56bn by 2020. If the discount were to 70%, NAMA resulting losses will be Euro1.19-1.34bn. At a 70% discount, folks!And DofF still thinks we shall all p***s off: NAMA is here and there is nothing we can do about it!
This is bad news for:
- the responsible and accountable Government and governance, for our DofF in effect is stating the position of the State as 'NAMA - no matter what'; and
- the Irish democracy, for DofF has expressed absolute and public disdain for the highest court of this land.
