Developers face wipeout over €11.7bn arrears
NAMA could liquidate companies over lapses of 120 days on debts
Published 03/11/2010 | 05:00
NAMA is moving towards major action against developers as the amount of loans now in arrears tops €11.7bn with no sign of improvement in most of the assets.
About €5.1bn of NAMA loans are now in arrears for 120 days or more, bringing the agency to a crossroads where it must decide to either liquidate certain development companies or refinance them.
The quarterly report to the end of June provides the first-ever breakdown of loans in terms of the degree of arrears involved. It shows that most of the impaired loans have overdue interest for several months, with hundreds of loans now in the 90-day and 120-day arrears profile.
"NAMA is addressing this issue in the course of the debtor business plan process,'' the agency said in the quarterly report. NAMA said there were only two routes now open -- either to enforce the loan or refinance the loan on new terms for the borrower.
"The sole driver of NAMA's decisions in this regard is the maximisation of the return to the taxpayer,'' the agency said in the report. Some 44pc of the so-called "delinquent" loans are 120 days or more behind on payments, figures in the report show.
The agency also has a large number of loans on interest roll-up or (interest capitalisation), while some loans do not actually carry an interest charge.
All the figures above relate to the nominal value of the loans. This is the value of the loans on the balance sheets of the banks. NAMA paid a discounted price for the loans.
According to the quarterly report, NAMA has loans with arrears of €11.7bn and these loans were bought by NAMA for €4.9bn.
The report disclosed that NAMA, as of June 2010, had not taken any action against developers, although there has been some action subsequent to the report. The agency is obliged to provide details each quarter on the number of foreclosure actions it has taken.
Meanwhile, a report by the Comptroller & Auditor General on NAMA said the agency will need additional insolvency experts.
NAMA recorded a profit of €6m for the second quarter and has a loss of €1m in the year to date. Income of €94m was earned on a loan portfolio that increased to €16.4bn. The major item reducing income was interest due on NAMA securities of €14m, expenses of €9.6m and losses on foreign exchange of €64m.
"Of course these figures will, over time, increase and decrease in line with market movement in interest rates. As such it is not a permanent or indeed a cash loss for the period,'' said NAMA.
Chairman Frank Daly said: "NAMA made strong progress during the second quarter as it completed the acquisition of the first tranche of loans from the largest developers and began directly managing those loans for the first time. The impact has been very positive".
Chief executive officer Brendan McDonagh said: "We are now setting out detailed objectives for debtors which will have to be followed by those borrowers who account for the largest loans."