Nama 'entitled' to take loans

The Attorney General has urged the Supreme Court to uphold a High Court decision clearing the way for the National Assets Management Agency (Nama) to acquire some €2.1 billion loans from property investor Paddy McKillen and his companies.

Attorney General Paul Gallagher said today banks who loaned those monies had volunteered to go into Nama and were entitled to assign the McKillen loans to Nama without his consent.

In entering loan agreements with those banks, Mr McKillen had already agreed contractual entitlements allowing the banks assign the loans to any party it chose, he added.

While Anglo Irish Bank chief executive Mike Aynsley had said Anglo wanted to keep the McKillen loans, that followed Anglo’s voluntary decision to go into Nama which would take over the rights and obligations of the bank regarding the loans “and no more”, the Attorney General said.

Nama faced a “mammoth task” which had to be completed as quickly as possible, he added. Its task was to remove the riskiest assets from the banks’ balance sheets so as to remove uncertainty about their recapitalisation requirements.

The Nama scheme was intended to deal with a situation where the banks “had not managed their relationships with borrowers and were over exposed” and, in those circumstances, the scheme had to be “as broad as possible”, Mr Gallagher said.

The Nama Act was designed to exclude any interest personal to a borrower and Nama was not obliged to have regard to considerations relevant to any borrower, Mr Gallagher said.

The Act gave no right to a borrower to make representations to Nama whether to acquire loans or not but rather provided for dealings between Nama and the banks.

Mr McKillen’s claims about entitlement to relationships with his banks had to be seen in the context that the banks only have those relationships because they are being supported by the State, he added.

The idea that, absent Nama, Mr McKillen could maintain his relationship with Anglo was “academic” as Anglo was now, in large part, “a recovery vehicle”.

Mr Gallagher was outlining arguments for Nama and the State opposing the appeal by Mr McKillen and 15 of his companies against the dismissal by a three-judge High Court last month of their challenge to the transfer to Nama of their loans with Bank of Ireland.

The appeal, being heard by a seven-judge Supreme Court, has implications for other loans held by the applicants with other participating financial institutions in Nama.

Nama has said it decided to acquire the €2.1 billion loan portfolio because it believed that extent of exposure to the financial institutions participating in Nama created a “systemic risk” to the relevant institutions.

At the heart of Mr McKillen’s appeal is his claim the loans acquisition decision of December 2009 breached his right to fair procedures in not affording him an opportunity to make representations on matters which affected his constitutional rights, including to property and to earn a livelihood.

He argues, prior to the decision to acquire, Nama had an obligation to engage in a qualitative assessment of the loans and to consider issues including the geographical spread of his property portfolio and whether or not the loans were impaired.

If those arguments are rejected and the court finds the Nama Act 2009 does not provide for a right to fair procedures, he claims the relevant provisions of the Act are unconstitutional.

Mr Gallagher, the architect of the Nama Act, said the judgment of the High Court was a very careful one which carefully analysed all the issues.

He also took issue with claims on behalf of Mr McKillen that the High Court judges had confused issues of their analysis. The reality was quite the opposite as the High Court had addressed all the issues in the case in “a coherent, logical and legally correct” way, he said.

The appeal continues on Monday.