THE FIRST legal challenge has been taken against the National Asset Management Agency (Nama) to stop the transfer of loans from a multimillion-euro borrower whose bank debts are earmarked for transfer to Nama over the coming months.
Businessman Paddy McKillen, owner of the Jervis Shopping Centre in Dublin, is trying to prevent the transfer of his loans and those of his business from Bank of Ireland and Anglo Irish Bank to Nama.
He is understood to be claiming their transfer would have a negative effect on his business.
Mr McKillen and 15 of his property companies have begun a judicial review case against Nama, the State and the Attorney General in the High Court to challenge the legality of the State agency.
A spokeswoman for McKillen’s companies said: “There is no justification in Nama taking our loans. All our loans are fully performing against quality assets, with no land and developments. We are simply protecting our business.”
Details of the legal action emerged as Nama sharply reduced the return that it expects to make over seven to 10 years from €4.8 billion to €1 billion in a revised business plan published yesterday.
Nama also dramatically cut the estimate on the number of performing loans on which developers are paying interest, showing that a further €12 billion in loans are not deemed to be performing.
Some 25 per cent of €81 billion in loans to be acquired by Nama are performing, compared with last year’s estimate of 40 per cent.
Frank Daly, chairman of Nama, said the change was “very significant” and that the agency had relied on incorrect information from the banks for the first figure.
“We were very disappointed that the information did not stand up,” he said. The revised business plan was “grounded in reality” and contained information Nama had discovered for itself.
He said the banks had shown “remarkable generosity” to the 10 biggest developers whose loans were purchased in the first tranche between March and May. Nama found that the banks were “sentimentally and emotionally attached” to the big borrowers and had not taken rent and free cashflow to repay loans when this was available, Mr Daly said. He warned Nama would not be “a soft touch” for insolvent developers. “We don’t really do sentiment in here,” he said.
Brendan McDonagh, Nama’s chief executive, said it would assess each borrower’s plans fairly but that some may go bust.
“Some of the borrowers will survive. Some may not,” he said.
Nama said that to achieve its €1 billion profit target, property values would need to rise by 3 per cent from current market values.
Nama estimates that at worst case it would make a loss of €800 million, and a profit of €3.9 billion under a more optimistic scenario.