AIB has substantially but not entirely resolved the legal issues surrounding €550m of loans it gave to five companies controlled by developer Liam Carroll. Mr Justice Peter Kelly expressed astonishment in January that the loans had been given out with only a letter and the deposit of title deeds as security.
The loans were subsequently transferred to Nama at a value of 0% because of the outstanding issues around the security, which the judge had described as being "fairly fragile" and "a far cry from a legal mortgage".
The bank has worked since then to resolve the issues but it is understood it has not been able to completely do so. It has thus been paid money by Nama for the loans but received less than it would have if the issues had been completely overcome.
The move by the Department of Finance to increase the minimum value of loans being transferred to Nama from €5m to €20m was done to avoid the banks taking even more significant losses up front, sources said. Many of the problems are in the development land market, where values are down by more than 90% in many areas.
Under the new rules, Nama is now expected to take on €73.4bn of loans from the five participating institutions, paying a total of €30.5bn. AIB will transfer €19bn of loans and will receive about €8.5bn, Bank of Ireland will be paid about €6bn for €10bn of its loans and Anglo will be paid €13bn in bonds for €35bn of loans. Nationalised Irish Nationwide and ESB will receive €2.6bn and €400m of bonds respectively for loans of €8.5bn and €900m.
In total, Nama will be dealing with 850 debtors, meaning the average amount borrowed per customer is an eye watering €86.35m. A spokesman for Nama said the agency had a heavy schedule of business plans coming before it, with more than 30 due for decision by early November. However, the agency expects 12 developers to face enforcement proceedings, either from the financial institutions or from the agency, within weeks for being uncooperative in the process. It is believed that no developer at this stage has fled the country and refused to engage with the bad-loans agency.
Nama has said that it intends to sell on or be repaid €500m worth of property loans it took on from the banks in the coming weeks and that it will make a profit on those loans.