MINISTER FOR Finance Brian Lenihan has warned developers and other big borrowers for property assets who are in a position of “hopeless insolvency” that they will wind up in bankruptcy or liquidation when the National Asset Management Agency (Nama) sets about its work.
Although the Minister said one of the most difficult tasks facing the new body will be to distinguish between the borrowers who have some prospect of a return to viability in the future and those who have not, he said that the process “has to happen” when Nama receives loans from banks and building societies.
His remarks to an Oireachtas committee suggest that large-scale lenders, who are currently the beneficiaries of bank forbearance, will have to confront their financial position when their loans go to Nama.
“All borrowers will be required to meet their full legal obligations. There will be a hardening of the approach to these borrowers – taxpayers’ money is at stake and the agency will be expected to protect it in a commercial way and with an independent remit,” the Minister said.
Brendan McDonagh, interim head of the new agency, echoed those sentiments. While stating that Nama’s remit was “not to be in the business of liquidation but to achieve work- out of the loans acquired over time”, he too drew a distinction between borrowers who have no prospect of survival and those who might be able to pull through.
“We have outlined that Nama will work constructively and professionally with those parties and stakeholders willing to co-operate with us and achieve its objective of ensuring the optimal return for the exchequer.
“However, those unwilling to do so for whatever reason will face the full legal consequences available to Nama to protect its interests. We also have made it clear that the transaction is between Nama and the financial institutions and that while developers are an interested party, Nama will pursue its own objectives.”
Mr McDonagh, a director of the National Treasury Management Agency, said a preliminary review of returns from the six guaranteed financial institutions suggested there may be between 700 and 1,000 borrowers with loans in excess of €10 million. “Probably about 10” borrowers have loans of more than €500 million, while some of them were indebted by more than €1 billion. Some borrowers had given personal guarantees to as many as six institutions, he added, reducing scope to call on those guarantees.
“The Government has stated that Nama will have a clear and strong mandate to ensure that Irish taxpayers do not ultimately end up paying for the over-exuberant lending practices of the past decade,” Mr McDonagh said. “Failure to face up, recognise and deal with the problems in our banking system is simply too costly to contemplate for this and future generations of Irish people.”
