Developers may have €1bn loans

Several major developers could have property loans worth a total of €1 billion each on the books of the six main banks, it was…

Several major developers could have property loans worth a total of €1 billion each on the books of the six main banks, it was claimed today.

Officials from the newly formed National Asset Management Agency (Nama) said it will be ready to start restructuring toxic assets two months after complex legislation is passed in the Dáil.

Nama’s acting managing director Brendan McDonagh told the Oireachtas Finance Committee in Leinster House that the body would hire up to 40 staff and could take 15 years to complete its work.

He told TDs and Senators he has been in contact with the main banks and they are willing to co-operate with Nama.

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Questioned on the estimated value of loans on the books of the banks, he explained: “Some borrowers would have in the region of up to €500 million.

“There are also a number of borrowers who could have more than €1 billion across the six institutions.” He added that somewhere between 1,000 to 1,200 borrowers could have individual loans worth than €10 million.

Work to prepare the way for Nama is currently being carried out by a steering group made up of officials from the Department of Finance, the Attorney General and the National Treasury Management Agency (NTMA).

He estimated that €60 billion in loans and between €20 billion and €30 billion of collateral assets will be transferred to Nama. “It is not possible at this stage to determine what the discount will be as this is dependent on a wide range of factors and also the fact that each loan will have to be assessed and valued individually,” Mr McDonagh said.

Nama will also be assisted by an advisory committee which will be appointed by the Minister for Finance Brian Lenihan soon. Mr McDonagh said Nama is currently hiring banking, financial and taxation experts to assist its work.

Mr Lenihan told the Committee: “The establishment of Nama will no doubt give rise to complex practical difficulties and it is important that we undertake the detailed preparatory work necessary before finalising the legislative and operational framework.”

Mr Lenihan reiterated at the four-hour meeting that legislation for Nama will be published in July and he may recall the Dáil from its summer recess to debate and vote on it. He added: “It’s not about the taxpayer assuming the risk, we must ensure that the banks and the developers absorb the pain.

“The taxpayer only enters the equation after that as the sovereign intervenor to protect the entire banking system.”

Property consultant Dr Peter Bacon, who is the chief architect of the Nama model, said similar examples of bank restructuring were successful in overseas economies in recent years.

Labour TD Joan Burton said the Dáil should be allowed to vet people appointed to senior positions within Nama.

Fine Gael TD Sean Barrett asked who would buy the toxic assets because banks would be very reluctant to lend money to projects for a second time.

However, Fianna Fail TD Frank Fahey said there was reason for a lot of confidence in Nama.

Mr Lenihan said the Government must maintain a functioning banking system that will ensure a flow of credit to small businesses. He said that as well as the roll-out of Nama, the Government was using its stake in Anglo Irish Bank, AIB and Bank of Ireland to enforce changes in their management cultures.

“It is vital that there is an overall change of culture as well as management structures,” the minister said.

Mr Barrett said Nama will be the most monumental financial decision ever made in the history of the state. “This is not monopoly money. It looks like the taxpayer is picking up the tab,” he told the Committee.

Fine Gael deputy leader Richard Bruton added: “There are so many people whose opinions you would have to respect, are very critical of the Nama model.”

PA