Inside the world of business

Nama starts to flex its muscles with developers

WE ARE only now beginning to see the powers the National Asset Management Agency (Nama) can wield when it comes to collecting debt from distressed developers.

Nama’s seizure of Paddy Kelly’s various hotel and property interests last week marks the most high-profile use so far of statutory receivers by the State agency. The agency is the only entity with the powers to appoint such a receiver. Nama can also appoint one of its own staff members as a receiver to avoid the sometimes highly expensive insolvency accountancy firms who are the first to be paid.

Receivers can normally only act under the powers bestowed on them in the security documentation drafted between the bank and the borrower. In other words, the bank’s enforcement power is only as good as the legal strength of its loan documentation.

And, as has become abundantly clear from the plethora of cases in Mr Justice Peter Kelly’s Commercial Court over the past year, bank records have been pretty poor.

The effect of section 148 of the Nama Act is to provide the statutory receiver with all the powers that would come with a well-drafted security document. In other words, Nama no longer needs to worry about weak loan documentation acquired in the loan transfers from a bank.

Another benefit of the legislation is that a borrower cannot seek to appoint an examiner to come up with an alternative rescue plan as is possible under normal receiverships.

Once a statutory receiver is appointed by Nama, the borrower is shut out from applying to the courts for an examiner.

This removes from the process a regularly futile option that can frustrate a bank creditor from getting some or all of their money back.

Banks likely to drain rump of pension fund

THE RUMP of the National Pension Reserve Fund was spent 10 times over during the election campaign, but the fate of the final €5 billion now looks sealed.

It seems likely that it will be committed to the banks along with the rest of the fund in the effort to plug the hole uncovered by the latest round of stress testing.

Some €10 billion of the fund had been already earmarked for recapitalising the banks, but with the bill heading for €25 billion it’s hard to see the rest of the fund being left out of the equation given the need to minimise the hit to the State.

This will no doubt have knock-on effects for the various initiatives in the programme for government that are supposed to be supported by the fund, including a new National Development Plan and the New Economy and Recovery Authority (NewERA), which will absorb the National Pension Reserve Commission.

This looks like being little more than a bank holding company. The proposed bid by Anglo Irish Bank and US insurer Liberty Mutual for Quinn Insurance may also suffer some collateral damage. Their joint proposal involved the commitment of some €500 million in fresh capital to the insurance group by the Government, presumably coming from the pension reserve fund.

Given that Anglo – and by extension the State – believes investing in the Quinn Group is the best chance of getting back the €2.8 billion owed by Seán Quinn and his family, it might make sense to hold back some of the fund for this purpose.

Competition body does not want to be ignored

THE NATIONAl Competitiveness Council’s call for the introduction of a property tax and water charges among priority actions to improve the State’s competitiveness is scarcely new. The NCC has been consistent in highlighting the need for the introduction of a property tax and reform of the education system as priorities.

It argues that income from new levies on water and property will be required to offset the prospect of higher income taxes which will eat away at any recent competitiveness gains.

Presumably, in reiterating its position, it hopes the new Government will be less inclined to ignore its recommendations than the previous administration.

Podcast

John Collins talks to Colm Keena about the conclusions of the Moriarty tribunal, hears about Kooky Dough from founders Sophie Morris and Graham Clarke, and interviews angel investors Nelson Gray and Seán Baker: irishtimes.com/business/podcast

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