Nama admits it may waive developers' debt if they have 'worked in good faith'

Neil Callanan

Nama chairman Frank Daly: moves to split developers' loans into two categories will lead to debt forgiveness and will prove controversial

Nama will allow developers who have repaid a certain amount of their debt to walk away from their obligations, a move that is likely to be very controversial.

Nama is to set up two loan classifications for developers, a spokesman confirmed following queries from the Sunday Tribune. The first will comprise the amount that Nama estimates the assets are likely to realise over the life of the business plan, known as Class A loans, plus a profit margin. Class B loans will comprise the difference between the Class A loan amount and the nominal value of the loans at the time of the restructuring.

Although the borrower will remain liable for the Class B loan, if they have sold all their company and personal assets and exhausted all means of repaying those loans, then Nama will discuss options with them for the category B loans, including releasing them from liability from their repayment.

"If they've exhausted all options, worked in good faith, reversed any asset transfers and demonstrated there is nothing left to sell, we will look at an agreement with them," a source said. "It's a choice of chasing them into penury or acknowledging what they've done."

However, the source stated that if the property market recovers, any surplus from category A loans will be offset against category B loans. Developers who fail to make their category A payments will still be bankrupted by Nama.

"Debtors will continue to be liable for the repayment of the full amount of their loans which were acquired by Nama and it will strive to make sure they repay the full amounts wherever feasible," the spokesman said.

Last year Nama approved the sale of close to €2bn in property assets held by borrowers in order to pay down debts either to the agency itself or to banks. Of that, €1.5bn has already been sold, 90% of it Britain. The figures include €1.3bn of property sales agreed prior to the acquisition of the loans by Nama, all of which was completed, with the sale proceeds reverting to the Irish banks. About €200m of the €700m in property sales approved after Nama acquired the loans has already been completed.

January 9, 2011

Comments

#1 Dr Robert commented, on January 9, 2011 at 6:40 p.m.:

What a farce.

The Irish property market boomed from 1995 - 2006. If the fall is half as long and half as deep - it means that the figures upon which NAMA is predicated will result in an appauling loss for the taxpayer.

#2 Jack meskill commented, on January 9, 2011 at 7:18 p.m.:

Still no bankers or politicians in jail !
Now we learn that Cowen had day-long golfing followed by booze and dinner meetings with Seannie Fitz and other dodgy bankers just before the crazy bank guarantee decisions that broke the economy.
Why have we no massive civil disobedience campaigns like the Greeks? Why are the media ignoring the issues and the cover-ups? ?

#3 Michael Flynn commented, on January 9, 2011 at 9:54 p.m.:

NAMA has no right to write off money owed to Irish taxpayers. What do our public interest directors (100k per annum), Government Ministers (200k), senior public servants (250k) and Opposition leaders (150k and rising) got to say about this. Best efforts my ass. Writing off billions owed to taxpayers is criminal. They borrowed to make a fortune. When they lost big, in capitalism, they should pay big. But we just don't get the notion of monetary pain for rich people in Ireland. Cronyism wins every time.

#4 Derek Brawn commented, on January 9, 2011 at 11:54 p.m.:

On Easter Monday 2009, Prof. Brian Lucey & I were guests on the Radio 1 Drivetime hosted by Philip Boucher-Hayes that day, and I made one point about NAMA on-air that I still hold today, and that is; that NAMA was set up & structured like a REIT (Real Estate Investment Trust). In other words, like a giant 'fund'.
I also went on to say that I believed that NAMA was not going to be a short-term 'run-off' vehicle like the 2 'bad' Banks that were established in Sweden between 1992-1995 e.g. 'Securum' (Gota Bank - like AIB) and 'Retriva' (Nordbanken - like Anglo). But instead NAMA would be seen by its staff & contributors (consultants, solicitors etc.) as an operator in its own right, a ‘player’ in the property market. This is now happening.
For instance, Frank Daly, Chairman of NAMA, consistently states that he wishes to co-operate with delinquent developers (who now owe the State literally billions of euro) as opposed to dragging them through the courts to retrieve monies now owing to the taxpayer. Unlike foreign-owned banks e.g. ACC/Rabobank, who were quick off the block to do this.
The structure of NAMA, specifically the 'haircut' imposed by NAMA on the Banks when transferring assets (performing or otherwise), has enabled the agency to view itself as this mammoth fund with the ability to acquire property assets at very significant discounts to the original loan amounts (remember valuation is irrelevant here as the Developer/Borrower still owes the full loan amount). This very basis of NAMA has led to the creation of a beast that may prolong the property slump for more than a decade. Think of it this way, what if NAMA decides to engage in building new developments (finishing off partially-constructed schemes), what if NAMA decides to become the largest landlord in the land, and moreover what if NAMA decides to let Developers’ off the hook for half what they still owe, but due to the substantial discounts that NAMA achieved, still results in a published ‘profit’ for the agency.
How likely is this? In my humble opinion, this is very likely, especially as NAMA operates in a vacuum (secrecy) and without well-established asset disposal targets.

#5 Hope commented, on January 10, 2011 at 1:29 p.m.:

This Daly has no right to do such a thing. This is taxpayers monies. I hope the the incoming government get this sorted. Those builders that somehow morphed into developers, as a result of their bank cronies lending them large sums of money, our savings monies, & borrowed money. And guess what a "socialite" teapot woman, previously known for collecting gossip,( students do it all the time in their halls) is now trying to operate as a developer in the states. Now how did our crooked lot allow this bunch funded by the taxpayer out of the country, no justice. NAMA 11, bandied about, & we will have NAMA 3, just get rid of it before its too late.

#6 sir roger peterson commented, on January 10, 2011 at 3:42 p.m.:

Is ther no one out there with any compassion.
Please read clearly what frank daly is saying.If the developer has given up everything reversed trnsfers and played ball then and only then will NAMA consider letting him off the hook.
If NAMA were not to do this the developer could simply move abroad declare himself bankrupt and tell NAMA to shagg off.
Mr Dalys plan is an excellent one.He is a very clever and well repected man.it seems that clowns like mr Flynn above wont be happy unless we build jails for everyone who owes money-that will achieve a lot now wont it.
I suggest an IQ tet before people are allowed to have an opinion.

#7 Hope commented, on January 10, 2011 at 6:43 p.m.:

#6, gardai to habitual criminal...tell me your story...& the names of your accomplices & I will let you go...A.. mickey the soup, & his pals from Mars.

#8 Michael Flynn commented, on January 10, 2011 at 8:14 p.m.:

Sir Paterson is rite. There shud be an IQ tet before clowns are allowed post comments. There shud also be a tet to check for typing wit one finger, spelin, knowledge of bankruptcy laws, consequences of leggin it and not paying bills, extradition, and the likely impact which the threat of a jail term has on borrowers truthfully disclosing their repayment capacity to NAMA during negotiations. There is currently no compelling reason to be 100% honest in such negotiations.
It would also be nice if those proposing IQ tets for others whilst throwing personal insults could be tested for arrogance before posting from the comfort of a lofty title. Then us clowns could focus on our juggling and leave the world to MBE's, former senior public servants and similar luminaries. Signed. Bozo

#9 Hope commented, on January 10, 2011 at 10:27 p.m.:

#6 I dont want jails built with all these new European requirements, all in boats & let them sail into the sunset.

#10 Enlightened commented, on January 11, 2011 at 2:37 p.m.:

The IMF will not tolerate any write downs or discounts when it comes to getting their money back with interest.

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