Business Irish

Friday 23 March 2018

Banks should use fewer receivers -- NAMA

Emmet Oliver

NAMA, the property loan agency, has told the banks to rationalise the number of receivers they appoint to insolvent companies as part of a cost-cutting drive.

Traditionally when a company is placed in receivership, the banks each appoint their own receiver to recover debts.

The latest move by NAMA should lead to cost savings for the banks and NAMA, but is likely to hurt insolvency firms who depend heavily on individual appointments.

"Where it makes commercial sense to rationalise the number of receivers involved in a case, NAMA are actively seeking to do so,'' NAMA said in a statement provided to the Irish Independent.

"In some cases, there may be justification for having more than one but this would be a minority,'' the agency added. NAMA itself is currently assessing applications for its own panel of insolvency experts for the Irish and UK markets.

NAMA is trying to bring down its cost of operation on a range of fronts but, at present, costs are expected to come to €215m per annum, although this figure will shrink as the portfolio it owns reduces. Over its entire lifetime, the agency is expected to incur costs of €1.6bn.

Overall, the agency expected to make a profit of €4.8bn, but this has since been revised after the banks admitted they didn't have as many income-producing loans as originally thought.

The agency now expects a profit of €1bn. The agency's projections vary widely depending on the recoveries it makes on its assets.

Under one scenario, the agency makes a profit of €3.9bn, but under a more pessimistic scenario, it makes a loss of €800m.

The agency has tried to insulate itself from any loss by telling the banks it will not be redeeming subordinated bonds given to them, in the event of a loss.

A sizeable proportion of NAMA's costs will be fees paid to the banks for managing loans on NAMA's behalf. The other key cost will be enforcement action against builders and developers. Already some contact has been made between some developers and NAMA companies.

The work of the agency, however, is facing a major obstacle in the shape of a legal challenge by developer Paddy McKillen. He is claiming that its powers are excessive and developers with performing loans will be placed at a commercial disadvantage.

His legal action, however, has not been supported by many other developers -- at least not publicly. Cork-based developer Michael O'Flynn recently told the Irish Independent he supported NAMA, but worried that it might become solely a disposal agency.

He said he hoped the agency would work with developers rather than trying to move against their companies.

The top 10 developers are currently having their business plans assessed and some of them have already got approval from the agency.

Irish Independent

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