Nama will be 'rigorous' over loans, says chief


SOME OF the developers whose loans are transferring to Nama have not yet abandoned the “extravagant mindset” of the 2003-2007 era, the chairman of the National Asset Management Agency (Nama) said yesterday.

Speaking at the Leinster Society of Chartered Accountants, Frank Daly said Nama had held face-to-face meetings with the 10 largest borrowers or their representatives, and the borrowers are now “fully aware” of what is expected in terms of the “thoroughness and stringency of their business plans”.

Nama had given the top 10 borrowers a month from when they transferred their loans to respond with business plans showing how they plan to deal with their debts and properties.

Mr Daly said yesterday the agency expects to receive detailed business plans from the developers by the end of the month.

Warning that the agency would be “rigorous” in recovering loans on behalf of the taxpayer, Mr Daly said no borrower is “too big” to fail.

Insisting that Nama will adopt a “realistic” approach to business plans, he warned the agency would foreclose on developers if necessary. “The onus will be on borrowers to demonstrate their viability, not on Nama to make a leap of faith based on borrowers’ reputation or record,” he said.

The appointment of statutory receivers or the use of vesting orders or other enforcement mechanisms would also be considered if necessary.

Mr Daly also suggested some developers whose loans are transferring to the agency may not be servicing those borrowings. While declining to comment on individual developers, Mr Daly said: “It’s safe to say that some of them are servicing their loans to a greater degree than others.”

The issue is complicated by the fact developers may have had specific arrangements with their bank on servicing their loans, he conceded. “If a bank has had an arrangement with a developer about an interest roll-up, for example, well that’s servicing the loan, so it’s difficult .”

Mr Daly confirmed that the total discount applied to the first tranche of loans being bought by Nama will be 51 per cent, rather than the 47 per cent estimate announced at the end of March.

The second tranche will begin to transfer from mid-June, with the third tranche moving in early July. Mr Daly declined to speculate on the expected discount on the second and third tranche of loans, saying the valuations will be calculated on a loan-by-loan basis.

Mr Daly said a feature emerging from a review of lists of eligible assets submitted by the participating institutions is the large concentration of borrowers in the €5 million to €20 million range of indebtedness. “Many of these are not professional property developers. They are people with other full-time occupations who got involved in the purchase of undeveloped land,” he said.