The word is getting out about the irish dream machine that is Nama in the wider financial world. The downgrading by Fitch indicates that outsiders are not buying the story that Nama debts will not impact on sovereign balance sheets.
Stacy-Marie Ishmael of the FT has commented very sceptically..
Under the terms of the plan, announced in September, Ireland will pay €54bn to take over bank debt with a book value of €77bn. The initiative is intended primarily to free the banks of their toxic asset burden and encourage lending to small businesses, according to finance minister Brian Lenihan.
But contrary to initial appearances, banks won’t be taking a haircut on the assets so much as they will be getting something of a hair transplant, as one person familiar with the plan put it. (link to article)
Constantin Gurdgiev picked up evidence of legal glitches of Nama operations that might impact on its ability to do business with non-national financial institutions.
International Swaps and Derivatives Association (ISDA) has issued an interesting opinion on Nama worth a read. Here are the main points (mind the legalese):
“…from an international perspective, a particular aspect of the NAMA Bill that has the potential to have a significant adverse effect on the transaction by participating institutions …of domestic and cross-border financial transactions, including privately negotiated or “over-the-counter” (OTC) derivative transactions (“Relevant Transactions”). (link to full article)
Edward Harrison in the European Economonitor thinks we are heading to the IMF in a boat without a paddle…
So you have a trifecta of bad news coming out of Ireland: a two-notch downgrade by a major ratings agency, a warning from the EU that the economy will be weak for sometime to come and that deficits targets will not be met, and another warning from the OECD that the banking situation in Ireland is still very grave.
Quite frankly, it is not looking good for an Irish recovery at this time without the help of the IMF. This all brings me back to my question one year ago: Is Ireland the next Iceland? They will be if the EU, IMF and Irish government do not take today’s bad news seriously and take drastic action to bolster the Irish banks, economy, and government finances. (link to article)
