THE CONSTRUCTION Industry Federation told the board of the National Asset Management Agency (Nama) last month that its €5 billion working capital facility was “inadequate” to “manage [out] or improve” the €74 billion in distressed property assets that have been transferred from Irish-owned banks.
In a hard-hitting presentation, made to the board of Nama on October 7th and seen by The Irish Times, the federation added that "most borrowers now believe Nama to be a massive liquidation vehicle".
“Nama sees itself as liquidator more than as an asset manager,” the federation stated in the presentation to Nama’s board, which is chaired by Frank Daly.
The federation argued that the Nama process had “decimated banks’ balance sheets through excessive writedowns and will do likewise for borrower/developers”.
It said Nama’s short-term business strategy was “inherently flawed” because of a lack of market. It argued that a 25 per cent reduction in three years would fuel a “vicious cycle” and said planned firesales would further depress the market and result in more defaults.
It called for Nama to “optimise returns” in the medium term rather than the short term.
The federation also pressed for “viable projects” to be “developed to completion as quickly as possible”.
“If Nama thinks there should be no new building for the next decade, it will be too late for Ireland when Nama realises that this was a mistake,” it stated.
The board of Nama was also told the agency was “ill equipped” to manage the assets, or even “bank supervise” them and this must be “urgently addressed”.
The presentation was made by federation chief Tom Parlon and Hubert Fitzpatrick, its director of development, housing and planning. The federation has commissioned Lombard Street Research to prepare a report on Nama and its operations.
This will include a view on targets set out in Nama’s business plan, the adequacy of the €5 billion working capital facility, and impediments to the future work-out of viable assets. The report is expected to be submitted to the federation within weeks.
In response to the criticisms, a spokesman for Nama said: “Clearly the CIF is representing its constituency. Our focus is on working with developers to recover the huge loans outstanding for the taxpayer. That is what we were set up to do.
“Our hope is, where possible, to work with developers to recover the loans. We have had very constructive dialogue with a number of developers. But where developers are not willing to work with us, we will move to enforcement.”
The federation also criticised the time it takes for Nama to approve credit for schemes.
But the Nama spokesman said said no credit application was having to wait more than one week for a decision.
Mr Fitzpatrick said last night that the presentation was aimed at “making sure that the board of Nama was aware of borrowers’ concerns”.
He said there was “good interaction” with the Nama board on the day to the points it made.
Nama is buying €74 billion in loans linked to 840 borrowers from five participating lenders.
The agency is paying €40 billion for the loans, which is creating big losses at the banks and forced the Government to inject capital and nationalise four lenders.
