The developer who took legal action to get into NAMA

There’s always one, and in this case, his name is Johnny Moran.

This is not news and the basic facts of the case were reported in the Irish Times last month, but the judgment in the case has only now been published, and it makes for interesting reading. It concerns a borrower at IBRC who is aggrieved that his loans weren’t transferred to NAMA.

Johnny Moran, the businessman behind the Holiday Inn Hotel in Pearse Street, a restaurant in Temple Bar, Tante Zoe’s restaurant, the Blarney Inn Hotel, Kildare Street along with an associated nightclub called Club Nassau, all in Dublin, seems to believe that if his loans had been transferred to NAMA, he would have benefited, but instead he continues to have to deal with pesky IBRC which has taken enforcement action against him in a separate case, which promises to be a good old mudslinging contest with allegations of “breach of statutory duty, breach of regulations, dishonesty, impropriety and fraud”

Johnny sued IBRC saying his loans should have been transferred to NAMA where, he claims, he would have enjoyed the following benefits

(1) “NAMA requires each borrower to submit a business plan whose primary purpose is to present a complete account of its financial affairs and to provide a detailed plan of how and when all liabilities to NAMA will be repaid. It is to be noted that the liability to NAMA is represented by the discounted price paid by NAMA for the original loan” So NAMA acquired loans from the banks with an average 58% discount or haircut, or to put it another way, NAMA paid 42c in the euro on average for the loans it acquired. Johnny thinks that he would have seen a debt write-down in NAMA.

(2) “credit activity continues whilst this process of engagement with borrowers is under way. NAMA has provided significant credit to borrowers”

(3) “were their loans to have been transferred to NAMA that NAMA would have accepted a business plan and would not have proceeded to enforcement”

(4) That NAMA has a comprehensive system for reviewing developer business plans which includes independent reviews and reviews by the “NAMA board, credit committee, chief executive or senior management, based on a cascading system of delegated authorities approved by the board.”

Of course NAMA might say in response to (1) above – as it has frequently in the past – that the full amount of the loan remains payable, though as we are beginning to see, NAMA is “restructuring” loans and developers are being allowed walk away from personal guarantees and personal recourse.

In summary, the judge in the case was having none of it, and decided a specific developer did not have a right to have his loans acquired by NAMA, and in any event, the full amount of the loan would remain payable and there is no evidence to show that NAMA would not have taken enforcement action in a way that was different to the approach of the IBRC.

NAMA has in the past had to contend with developers like Paddy McKillen – when did we stop referring to Paddy as a property “investor”? – who have done their damnedest to stay out of NAMA. It is novel to see a lone developer fighting to get in, though it would appear from the judgment that he might have had unrealistic expectations of life in NAMA.