With at least 13 NAMA developers* already declared bankrupt in the UK, it is perhaps a good point to ask if such bankruptcies are undermining NAMA’s work. And last week, the Fianna Fail finance spokesperson Michael McGrath did exactly that when he asked Minister for Finance, Michael Noonan about the matter. The full exchange is here (with emphasis added)
“Deputy Michael McGrath: his views on whether the work of the National Assets Management Agency is being undermined by developers attempting to avail of bankruptcy in the UK; and if he will make a statement on the matter. [31432/12]
Minister for Finance, Michael Noonan: I am advised by NAMA that for a debtor to avail of bankruptcy in any given jurisdiction he/she must first of all establish that jurisdiction as his/her centre of main interest (COMI). The establishment of COMI is a matter for the relevant authorities in the jurisdiction in which bankruptcy is sought. NAMA further advises that in its position as a secured creditor it is generally neutral on the locus of bankruptcy proceedings as long as location does not prejudice the Agency’s potential recoveries from the bankruptee.
I am also advised by NAMA that the comparatively shorter duration of bankruptcy in the UK is not a consideration for NAMA as the bankrupt’s assets remain in the control of the bankruptcy trustee long after the bankrupt may have been discharged from bankruptcy and any failure to make full disclosure may result in the period of bankruptcy being extended, in the case of the UK beyond the initial one year period. NAMA advises that it is currently challenging the release from bankruptcy in Northern Ireland of one debtor, due to non-cooperation with the bankruptcy trustee.
NAMA advises that its position on the locus of bankruptcy proceedings is partially based on positive on-going engagement with several trustees in bankruptcy of NAMA debtors who have been adjudged bankrupt in the UK. The Agency points out that the bankruptcy regime in the UK is well established, sophisticated and that trustees in bankruptcy under the UK system possess extensive powers to compel production of legal and banking information, on a cross-border basis, from the bankrupt. These powers have been used in bankruptcy cases involving NAMA debtors to uncover significant undeclared assets.
The position of unsecured creditors is fundamentally different. Unsecured creditors, whose claims are subordinate to that of secured creditors, may seek to bolster their position by pursuing bankruptcy proceedings against a debtor. It is worth noting that bankruptcy proceedings are rarely brought by secured creditors and usually in cases of non or lack of full disclosure.”
The response above might come as a surprise to some developers actively considering changing their Centre Of Main Interest from the Republic of Ireland to the UK with the intention of ultimately seeking bankruptcy; they now learn that NAMA is “neutral” on the matter as long as it doesn’t prejudice NAMA’s potential recoveries. Now unless the difference between the 12 month bankruptcy period in the UK and the 3-12 years in the Republic of Ireland, “prejudices potential recoveries” then NAMA is seemingly unconcerned. In fact NAMA is apparently satisfied that the expertise of bankruptcy trustees has uncovered previously undeclared assets.
The Northern Ireland developer whose discharge from bankruptcy is being challenged by NAMA, is not identified by Minister Noonan above, but with only six apparent candidates – Alastair Jackson, Fergal McAlinden, Peter McDaid, Mervyn McAlister, Peter Dolan, Sam Thompson – it can’t be that difficult to identify the lucky developer. We know that NAMA is continuing to challenge the discharge from bankruptcy of Cork developer, John Fleming and is seeking an attachment on earnings for two more years, and it is understood there is an issue about John’s pension also, but John’s bankruptcy was in England, so this Northern Ireland challenge relates to a different developer.
*the 13 NAMA developer s already declared bankrupt in the UK – John Fleming, Ray Grehan, Danny Grahan, Tom McFeely, Patrick Fitzpatrick, Bernard Doyle, Paddy Shovlin , Northern Irish developers Alastair Jackson, Fergal McAlinden, Peter McDaid, Mervyn McAlister, Peter Dolan, Sam Thompson
NAMA Wine Lake 
Noticed the pension considered an asset in the brand new ‘modern’ insolvency bill.Appeared,a little churlish of NAMA going after John F’s pension.
Based on the 3million ceiling most NAMA’d developers excluded,expect this to increase and continue.
the 3 million is a paper ceiling and is exempt if ALL secured creditors agree to the exemption… section 87. 5. i.e. it has no max. figure.
@jr thanks for that, practically impossible to get 100% creditors consent,but it is provided for. In certain situation in the US,the courts have had to use ‘cramdowns’ to force creditors to be reasonable.
“During the financial crisis of 2008, cramdown was used to help troubled mortgage borrowers by allowing the bankruptcy courts to alter mortgage terms, subject to certain conditions, in an attempt to keep borrowers from foreclosure when one or more tranches of the mortgage did not agree to loan modification.”
Read more: http://www.investopedia.com/terms/c/cramdown.asp#ixzz1zU1YM8xA
I agree with the over €3M 100%, but in the sub €3M 65% of all creditors must vote in favor and at least 50% of both secured and unsecured debt.
I’ve read the Personal Insolvency Arrangements (PIA) Chapter 4 a few times now and I’m struggling to get to grips with it, as in what does it offer? most debt we are talking about in this country is secured debt on mortgages/land loans.
Why would a secured creditor ‘approve’ of anything that would potentially reduce his payback… the debtor in the secured debt scenario will be left with nothing on the table but still owing the secured debt, after 6 years of effort in a PIA. Why would 50% of the unsecured debt vote for knocking himself out and letting the secured guy stay in the game, it doesn’t alter anything that is not already so, but a €5K CC debt could unhinge a €500k secured debt arrangement in a PIA deal.
The modified Bankruptcy laws reduce the existing 12 year without automatic discharge to 3 years with automatic discharge (with the potential additional 5 year kicker of the Bankruptcy Payment Order (BPO), so potentially max. 8 years in reality). A debtor cannot self-petition for bankruptcy without first attempting a PIA (for secured assets). Extra costs and time but the secured debt is unaltered as above, the debtor looses all in bankruptcy but gets back to Zero.
Perversely, reducing the duration from 12 to 3 years makes it more ‘affordable’ for a bank to go down the bankruptcy route – with the addition of a BPO, which can be modified should financial circumstances change for a further 5 years. The secured debt is unaltered.
I go back to the keane report
“without effective bankruptcy legislation the mortgage arrears problem will not be resolved”. emphasis on ‘effective’.
I can’t see how the insolvency part assists anyone with secured debt other than forcing them through an extra loop before bankruptcy after 3 years and reset to Zero. Am I seeing this correctly?
p.s. I’ve paid little or no attention to Debt Relief notices (DRN’s) or Debt Settlement Arrangements (DSA’s) as they deal with unsecured debt less and greater than €20K respectively. Handy for credit cards etc. but no use to the property end. Chapter 4 of the legislation and the preamble.
p.p.s the only reference to pension I can see is as income when retired under a DRN.
Sean McWilliams is also a possible
http://www.bbc.co.uk/news/uk-northern-ireland-foyle-west-13990837
I believe the big plans referred to above are ‘Ballymacool, Letterkenny, a development not commenced’
http://m.donegaldemocrat.ie/news/local/nama-holds-15-properties-in-donegal-1-2923504
@jr excellent review and analysis,had a read of it myself and concur with your comments, London calling if you are above 3 million.Has anyone ever encountered a ‘reasonable’ creditor,following the Ulster bank story and the comments in IT and Indo from various posters,most point out the very stringent policies of Ulster if one misses a CC pmt. or Mtg. payment.If under a DRN pension income is counted,assumed its an ‘asset’ under PIA,how else would it be treated,but stand to be corrected.
@JG I can’t see any mention of how to treat a pension under a PIA, income or asset.
The more I read the more it seems bizarre, I’ll post my observations under “Very few bankruptcy tourists expected here as Ireland fluffs new personal insolvency legislation” as its a bit off-topic here…
@jr agreed,probably my fault for mentioned the ‘pension’ part in relation to NAMA going after John Fleming’s rather minuscule one,after a lifetime of paying taxes in Ireland and creating employment.Great analysis by the way,tried reading it a few times myself,out of my ‘debt’ !
Considering,the silence from the banking industry assume they are pleased,difficult to garner much public sympathy these days for insolvent individuals with ‘assets’ above 3million.
Apologies to NWL for straying off topic.
https://namawinelake.wordpress.com/2012/04/22/nama-continues-to-pursue-discharged-bankrupt-john-fleming/