The NAMA amateur players

I predict that NAMA is going to be the most entertaining theatre seen in the State since Oscar Wilde was in short pants. Already we have high farce, turning effortlessly to abstract fiction in the blink of an eye.

The first round of invitations to the NAMA drama, the opening night one might say, included the debts of one Ballymore Properties. This is a private company, originally the brainchild of Sean Mulryan - one of Ireland's "Masters of the [property developers] Universe". All I can gleen at the moment, given the paucity of information about how someone else is spending your and my hard earned income, is that Ballymore debt has been transferred to NAMA and the average NAMA discount was 47%.

Now, a logical conclusion to reach about a company that has had its debts sold on at a 47% discount is that the company in question is insolvent. It is a question of balance. Sheets that is. If NAMA, on the back of their own bottom up valuations and financial investigations think that 47% of the total obligations will not be recovered (remember this figure is supposed to include a premium for Long Term Economic Value), then the total value that will be recoverable from the assets of the company is extemely likely to be less than the orginal total value of the debt. If that is the case, there should be nothing of value left at any point for distribtution to equity shareholders of the company.

In other words, a shareholder of any company that has had its debts NAMA'd, should not be expecting any money back - because there won't be any after the debt and interest on the debt has been repayed (and then repayed only partially).

So what price would you put on a share of the equity of such a company? Go on, have try:

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Doo-doo, doo-doo, doodoodoodoo, boing

Did you guess zero? Well, you're wrong.

I have some sympathy. I can understand how you would make such an elementary mistake. The correct answer is anything from 30 cents per share to 79 cents per share.

That's right. Ballymore themselves, with the help of their mates at Davy Stockbrokers, reckon shareholders have a healthy 79 cents per share in the bank.

Some asset managers in the Irish market who were clever enough to drop a wad of client cash into this vehicle at inception are a bit more conservative though. Some of them think that shareholders can count on 30 cents per share and book that value in their clients' or pooled fund accounts.

So it's all fine, hunky dory, AOK. You see in NAMA world you can get something out of nothing.

And leaves us with a graceful transition to light opera. Cue Gilbert and Sullivan...

"A paradox, a paradox, a most amusing paradox,

haha haha haha haha a pa-ra-dox...."