Minister says NAMA can continue to operate even if balance sheet-insolvent

Bankruptcy is no bar to NAMA it seems, as the minister suggests that solvency = liquidity. Hmmm… that sounds awfully like what we heard re banks in 2008…

NAMA Wine Lake

It seems to be a moot point for the time being given that NAMA is saying it will make a profit of €200m in 2011, but Minister for Finance, Michael Noonan last week said in a reply to a parliamentary question that NAMA does not have any minimum capital requirements and can accordingly continue to operate even if balance sheet-insolvent.

So what is “balance sheet-insolvent”? This is where a company’s assets are worth less than its liabilities. For example, Independent News and Media – the loss-making media group that Denis O’Brien and the O’Reilly family are scrapping over – recently reported its preliminary 2011 financial results and said that its assets came to €573.7m, its liabilities to €596.5m and the company therefore had €22.8m of net liabilities. It is balance sheet-insolvent. Now this is not to suggest that IN&M can’t pay its bills as they fall due, it seems to…

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