TWELVE developers face being put out of business for stonewalling the State's toxic loan agency over €300m worth of property loans.
They will be brought to court within weeks for failing to co-operate with the National Asset Management Agency (NAMA). Their companies face being shut down.
This is the first time NAMA has bared its teeth as it prepares to offload €500m worth of property in the next few weeks.
At the same time, its very existence is being challenged by a developer, who, the Irish Independent has learned, owes €2bn but argues that his loans should not be transferred to the agency.
Paddy McKillen is challenging an attempt to transfer an €80m tranche of loans held with Bank of Ireland to NAMA because he claims they are not development loans and are being fully repaid.
Mr McKillen has hired some of the world's leading economic and banking experts, including Nobel Laureate Dr Joseph Stiglitz, to support his case.
His representatives have refused to disclose what professional fees have been paid to expert witnesses who have provided sworn statements in support of his action.
This newspaper has learned that Dr Stiglitz, a professor of economics at Columbia University in New York and a former president of the World Bank, will tell the Commercial Court that there is no benefit to the taxpayer in NAMA taking over good or performing loans.
Dr Stiglitz will say that in fact the taxpayer "may be worse off" if NAMA underpays for performing loans because of the likely increase in public costs of recapitalising the banks.
Its acquisition of good loans will "hurt the banks and the economy", Dr Stiglitz will say.
Meanwhile, the chief executive of NAMA, Brendan McDonagh, has signalled that the agency is clamping down on unco-operative developers, as it seeks to claw back for the taxpayer as much money as possible from property loans.
These developers are among the 1,500 who have either had their loans transferred to the state agency or who will soon have their loans moved across, Mr McDonagh said yesterday at the Cantillon Summer School in Tralee, Co Kerry.
"Part of this is saying we are serious," said Mr McDonagh. "The borrower has to be in a frame of mind as to whether he wants to work with us. If he doesn't, then we have to take him to court."
NAMA officials can quickly work out who is serious and wants to co-operate, he added.
Those who don't co-operate after 30 days, he said, will still not do so after 300 days. However, he added that most do want to engage with the agency.
The court cases will be taken by banks which extended the loans on the orders of NAMA's board. Some cases may be agreed before the cases come to court but NAMA is determined to pursue the cases.
The agency, which has been criticised for moving slowly to reclaim loans, is close to agreeing a final deal with two of the country's top 10 developers.
A final agreement on how their debts will be paid and what land will be sold is due to be made with 40 days, Mr McDonagh revealed.
NAMA's board has agreed the often complex deals, which have now been referred back to the developers for a final review.
The agency does not expect the average discount paid on the loans to be any greater than the average for the other two tranches of loans, Mr McDonagh said, adding that some agricultural land is being written down by as much as 90pc.
The agency is also preparing to sell off land worth around €500m as it tries to meet a target to dispose of a quarter of its portfolio by the end of 2013.
The land will be sold by local auctioneers and those buying the land will not know that it is being sold by NAMA.
The only signs that NAMA is active will be "realistic asking prices", Mr McDonagh added.
NAMA still expects to have bought loans originally worth €80bn by February, he said.
Around €50bn was borrowed by just 100 individuals, with the remaining €30bn being borrowed by the other 1,400 developers whose loans are being moved across to NAMA.
brendan keenan Page 23