In December 2010, fourteen months ago, and after NAMA had acquired most of the €74bn of loans which it was eventually to acquire, the NAMA chairman Frank Daly issued a pre-Christmas message in which he said “as a result of the Agency’s insistence, a number of borrowers whose loans have been acquired by NAMA have reversed or are in the process of reversing transfers of over €130 million worth of assets which they had previously sought to transfer beyond the reach of NAMA or the relevant Banks”. And remember that December 2010 was 7-9 months after NAMA had acquired the first tranche of loans from the NAMA Top 10 developers which were worth a staggering €15bn, and four months after the Agency acquired the second tranche with the 20 next-biggest loans which totalled €12bn.
It is difficult to put NAMA’s December 2010 figure in context – was €130m a “good” result for NAMA? The media would have you believe that developers were squirreling wealth away on an industrial scale, and that this malfeasance mostly involved putting property in the wife’s name (it is a feature of the Irish property world that developers are almost exclusively male). So €130m might be perceived as small in the context of loans for assets worth €74bn – surely borrowers of €74bn had at least a few billion of unencumbered assets to protect? And the view on here is that if developers who ran up debts of €74bn only managed to transfer €130m to their wives (or girlfriends or elsewhere beyond NAMA’s reach), then they were either too stupid to see the downturn coming or too honest to act so as to deprive creditors – neither seems likely, though there’s possibly a modicum of truth to both, so the implication is that spousal transfers should be far greater than €130m.
Fast forward 14 months to February 2012, and remember that NAMA has now examined 95% of the developers’ business plans, according to the NAMA chairman last week, and remember these business plans are required to disclose details of asset transfers in the past five years, and in the Dail yesterday, Minister for Finance Michael Noonan told the Fianna Fail finance spokesman Michael McGrath that NAMA had now succeeded in reversing €160m of transfers – in other words an additional €30m when compared with December 2010. The €160m of reversed transfers represent 31 developers. Minister Noonan says there are another 17 developers being pursued. The Minister is reported to have said that NAMA is pursuing five “cases” through the courts for the reversal of transfers – it’s not clear if this is five developers or just five legal actions, remember that NAMA has initiated legal actions in Canada, the US and the UK against the Grehans, so there could well be “five cases” there alone. There are pending legal actions inIreland against Sean Dunne and the directors of Capel Developments, but it is understood that these are related to judgment orders, rather than reversals of any transfers. The David Daly case did have an element of spousal transfer of cash, but David Daly has now refinanced his loans, so that is no longer a NAMA issue presumably.
Again we have little context to be able to judge if this is a good or bad result for NAMA. If NAMA is indeed hounding developers and if the media image of widespread transfers is correct, and developers with €74bn of loans had a few billion of unencumbered assets to protect, then it somehow seems like a small number. In light of the TAIL transaction at Treasury Holdings which we learned about yesterday where €20m of shares were supposedly transferred to the founders of the company for what on the face of it appears to be well below value – disputed apparently by Treasury who seem to claim the transaction was at open market values – and two years after the transaction, NAMA has still not gone to the courts to reverse the transaction, despite referring to it in its affidavits as “a grave concern” and “making good of the financial damage caused to Treasury by the TAIL transaction has been a central requirement of NAMA at all material times” and “at no stage has NAMA accepted the propriety of what was done in the TAIL transaction” then you might indeed wonder if the €160m of reversed transactions is anything but a paltry start to reversing developer transfers.
Deputy McGrath’s question and Minister Noonan’s answer in the Dail yesterday should be available later today and will be published here verbatim when available.
UPDATE: 23rd February, 2012. It seems NAMA is sticking by its view expressed here, that there is “no pot of gold” in developers’ transfers. Deputy McGrath’s question was actually dealt with on Tuesdaythis week, not Wednesday, and can be found here, and is reproduced verbatim below. “Deputy Michael McGrath asked the Minister for Finance if he will provide details of the number of individual cases that comprise the €160 million of asset transfers by National Asset Management Agency debtors to family members which have been now reversed by the agency; if all of these reversals have been achieved without the necessity for court action; the number of individual cases in which NAMA is pursuing similar reversals; and if any court action is planned or currently underway to achieve this objective.
Minister for Finance (Deputy Michael Noonan): NAMA advises me that in the case of 31 of the 188 debtors under its direct management, it has secured agreement to reverse asset transfers with an aggregate value of €160m. In another 17 cases, assets transfers have been identified and NAMA is confident that its current discussions with debtors will conclude with additional transfer reversals or the granting of charges to it over unencumbered assets. In 5 other cases to date, NAMA has initiated legal action to reverse asset transfers. NAMA also advises me that in the case of 32 of those debtors, no asset transfers to relatives appear to have taken place in the past five years.
A number of directly-managed debtors have borrowings with no recourse other than the secured asset and in those instances debtors have no legal obligation to reverse asset transfers or offer additional unencumbered assets. Finally as regards the other debtors under its direct management, NAMA has either already enforced against the debtors concerned or is engaged in further investigation and legal review of possible asset transfers. Some of these cases will ultimately lead to additional reversals or the granting to NAMA of additional charges over assets which are currently unencumbered.
In the case of the 598 debtors whose debt is managed by the participating institutions on NAMA’s behalf (par debt of €13 billion), the business plan cycle is approaching completion. It is expected that the current engagement with these debtors will yield additional reversals of asset transfers to relatives by the time the process has completed.
NAMA has already stated that the maximum amount it expects to recover as additional security is of the order of €500 million.”