‘We won’t bankrupt you,’ NAMA tells developers who co-operate
The assurances come as an increasing number of developers in NAMA have moved to England and declared bankruptcy under that country’s relatively lax bankruptcy laws.
A total of 65 NAMA debtors have declared bankruptcy in the UK or US.
NAMA is worried that developers have little incentive to continue co-operating with the toxic loans agency if they know that they are likely to be forced into bankruptcy at the end of the process later this decade.
The agency has told Finance Minister Michael Noonan in its annual report that it wants to combat what it calls “debtor fatigue”.
“There is a risk to NAMA’s sustainable asset-management capability from potential debtor fatigue,” the agency told Mr Noonan.
“The longer the debtor resolution process extends, the more a debtor may feel that insolvency or bankruptcy may be a viable alternative to end their relationship with NAMA more quickly.”
The new assurances tell developers that their remaining debts will be wiped and they will be allowed to hang on to some of their wealth. The informal offers are only being made to developers who are seen to co-operate completely with the agency and who are reversing property transfers to wives, children and girlfriends .
The promise is likely to ensure that NAMA recoups as much money as possible for the State but it is also likely to anger some taxpayers who believe that developers who owe tens of millions of euro should be forced to go bankrupt.
They are also likely to be uneasy with the nature of the informal agreements, which do not give concrete guarantees about how much bust developers should be allowed to keep at the end of the process.
Some developers are also likely to get increased bonuses as the price of commercial and residential property rises.
NAMA initially promised some developers a percentage of any proceeds from sales as an incentive to achieve high prices.
As property prices pick up, these developers are now likely to see their incentive bonus rise in tandem with the rising property market.
The same report also calls on Mr Noonan to be open to requests from NAMA for new bonuses or higher wages for agency staff. NAMA says that the improving economy and the plan to wind down the agency mean that the agency will struggle to retain staff.
“Continued and potentially increased loss of staff poses a significant risk to the achievement of NAMA’s objectives,” the report says.
“NAMA has identified this as a key risk to its business plans.”
NAMA chief executive Brendan McDonagh is entitled to a basic salary of €430,000 but he has waived part of this to earn a salary of €365,500 a year.