CORK PROPERTY developer John Fleming’s decision to go bankrupt in Britain is now expected to become a major trend and, in turn, a significant headache for the National Asset Management Agency (Nama).
A second high profile property investor, who did not want to be named, has confirmed that he has recently relocated there ahead of filing for bankruptcy. A number of other developers are known to be considering following him.
Nama has been offering developers debt forgiveness packages – although it does not use that phrase – but frustrations with the length of the process, and the absence of an income to date, is causing some to consider filing in Britain for bankruptcy.
“I haven’t received a penny from them,” said a tranche two borrower. “My feeling is why wait 10 to 15 years to go through this process when I can be in and out of bankruptcy in Britain in 12 months? Okay, I’ll be a bankrupt but I can get on with my life then.”
You can declare yourself bankrupt in Britain if a judgment or statutory order is registered against you. Bankrupts emerge with a clean slate after 12 months, although the process can take as little as nine months. In Ireland, by comparison, a bankrupt can remain so even after they die.
Younger developers in particular are considering making the move. “The older guys know there’s no point starting over, but for the younger ones there’s still a chance to come back here or go elsewhere,” said a senior industry source, while a director at a tranche three borrower said he expects a spike in the numbers using UK bankruptcy laws.
Nama sources believe that those developers who have reached the memorandum of understanding stage with the agency will remain within the process. “There’s been no sign they’re preparing to walk away,” the source said. He acknowledged that a number of developers who refused to engage with Nama may be set to leave.
In that respect, Nama chairman Frank Daly’s recent speech at the Licensed Vintners Association was viewed as a pre-emptive strike by the asset management agency. Mr Daly warned the agency is likely to move against some of the 30 developers with whom it is currently engaged.
“It is likely that enforcement action will follow for some of those in negotiation as some debtors are making little effort to progress matters and have not yet adapted to the new realities some 3½ years after the property market collapsed,” he said.
They later moved against 15 properties with links to developer Paddy Kelly. Further actions are expected shortly.
“A lot of guys are washing their hands of things and want to move on,” the director of the tranche three borrower said.
