NAMA must deal with contractors left in the lurch by developers
Published 17/02/2010 | 06:56
The National Asset Management Agency (NAMA) will have to deal with a large number of building firms and sub-contractors who are owed substantial sums by some of the country’s leading developers.
The Irish Independent has learned that some developers have amounts outstanding with building contractors who worked on their projects. Developers are now compiling business plans for the toxic loan agency and must outline who their main creditors are.
NAMA yesterday declined to comment on how these contractors will be treated when the business plans are reviewed or whether any of these firms –many of them large – will be able to work with the agency on finishing selected building projects.
Don O’Sullivan, director of tendering and contracting with the Construction Industry Federation (CIF), said yesterday that the contracting companies were concerned about recovering monies owed to them.
He said some of the outstanding amounts were substantial and several contracting companies, who handle the actual construction phase of a project, had “unsettled accounts” with their developer clients.
“Developers come in all shapes and sizes. Some do development and construction, others only do development. Others hire sub-contractors. The point is that many of the contracting companies are now becoming substantial creditors and are in many instances out of pocket,” he added.
Mr O’Sullivan said the CIF was calling for a “stakeholder approach’’ where NAMA and the contractor work together on finishing off a development.
He said building firms would have a “strong case” to finish out projects if they were creditors and most of them would be satisfied to work with NAMA as a co-investor.
Contractors are normally paid via a system of interim payments or draw downs, usually made monthly after the work completed to date has been assessed and measured.
But many developers have fallen significantly behind on these payments, with dried-up bank finance and breaches of loan agreements forcing developers to pledge more collateral.
NAMA could face a problem if a contractor has a right of repayment ahead of a bank in the event of liquidation, although NAMA planners are confident that under strict legislation the agency will always be the primary creditor, standing in place of the original bank.
Another legal problem is that contractors who are owed large sums could potentially walk away from the project.
The position is also complicated by the fact that a large number of NAMA loans are held outside Ireland where insolvency law and the rights of creditors are very different to those in Ireland.