Small developers escape NAMA

Laura Noonan

October 01 2010 04:46 AM

MORE than 650 smaller developers are set to escape the clutches of the National Asset Management Agency after it announced sweeping changes to speed up its work.

To make the NAMA process faster, the agency has decided not to take over the borrowings of 650 developers whose debts had originally been ear-marked for transfer.

The newly excluded developers have borrowings of less than €20m, and all are customers with AIB and Bank of Ireland. NAMA was originally due to take over all developer loans worth more than €5m and that threshold remains in place for the other banks.

The new plan-of-action for NAMA emerged yesterday as part of the overall solution to Ireland's massive banking crisis.

It had originally planned to buy the loan books of six Irish banks by next February. That timetable has now been pushed forward to the end of the year.

The deadline for taking over loans from embattled Anglo Irish Bank has been ramped up even more, with NAMA now set to take over all of Anglo's loans by the end of October.

"There's a lot of uncertainty out there about how much NAMA will pay banks for their loans," said one source. "The idea is to remove that uncertainty as quickly as possible."

Diligence

"By taking out the smaller developers you take out a lot of time-consuming due diligence," said another source, adding that most of the smaller loans were coming from AIB and Bank of Ireland.

Jervis Centre developer Paddy McKillen has been vigorously contesting the transfer of his loans, claiming it will damage his business, so the 650 borrowers may see some benefits from falling outside the loans agency.

NAMA is also changing the way it deals with the biggest developers. It had originally planned to manage the borrowings of the 100 developers who owed more than €100m, with the management of other borrowers left to the banks.

NAMA will now directly oversee the borrowings of Ireland's 150 biggest developer-borrowers, a group that encompasses any borrower who's on the pin for more than €50m.

The push for speed comes after yesterday's revelations of dramatically worse-than-expected discounts on the loans set to transfer to NAMA between now and Christmas.

AIB's first two batches of loans were transferred to Nama at a discount of 45pc, meaning the agency thought the loans were now worth 45pc less than AIB had advanced.

The Financial Regulator yesterday suggested AIB could be forced to accept a discount of 60pc on the rest of its Nama-bound loans, since the quality of those loans was so much poorer.

The discount on Anglo's remaining loan transfers could shoot up to 70pc under the worst-case scenario, the regulator said, although Bank of Ireland's discounts are likely to be confined to the mid-40s.