It’s a good job that Larry Goodman isn’t in NAMA, he would never have been entitled to buy his assets back from the banks in the 1990s, because in NAMA’s eyes, he would be a “defaulting debtor” and NAMA is prohibited by section 172 of the NAMA Act from selling assets to “defaulting debtors”. There’s a good political reason for this – it’s hard enough to stomach the colossal debt shouldered by the State in bailing out the banks, but to locally see the same developers buying back their properties, for what would generally be a large discount and continuing as if nothing had happened, might be the straw that broke the camel’s back. Or at least, that’s how former Minister for Finance, the late Brian Lenihan portrayed it.
The 76-year old Larry, currently in the headlines, for his horse infused burgers rebounded from his misfortunes after the collapse of meat business in 1991 when the Iraq/Kuwaiti war meant he wasn’t going to get paid for his meat exports to Iraq. He bought back his business from the banks four years later, and has gone on to become one of Ireland’s richest men, with his meat processing business, an extensive property portfolio on both sides of the Border – he’s developing a shopping centre in Newry – and private hospitals. Another Irish man who likes to keep his affairs private, he will not have been happy with the publicity this week.
Over at NAMA, there has been some internal agonizing going on about the prohibition on selling assets back to defaulting developers – the NAMA chairman, Frank Daly said last year “It might not be popular to say it but, for example, the restriction in the Act which bars us from selling assets back to a defaulting debtor is a restriction that does not apply to any other body in the same business or space as us. I do not know if that will be a problem in future but it is something we must consider “.
What we’d like to know is how much the prohibition is costing NAMA, and by extension, the tax payer. If it’s only €2m over the life of NAMA, then it may well be a political price worth paying, just so we don’t have to have our faces rubbed in the sight of developers who we thought had failed, with the debt transferred to our shoulders courtesy of Government action, then getting back in the saddle on the same property at a discount. But if the cost is €2bn, then I for one, would want to see the prohibition repealed. The likely cost is probably somewhere between the two.
So, the obvious question is how much are we losing. And NAMA should be in the best position to give an overall independent assessment. But when asked for an assessment in the Dail this week, NAMA, through the responsible minister, in the best civil servant tradition that even Sir Humphrey would admire, said “as NAMA is not permitted to sell assets to borrowers in default, neither I nor NAMA are in a position to assess the potential foregone profit (if any) if NAMA were permitted to sell assets to borrowers in default.”
This is the NAMA that wants to portray itself as a commercially-adept entity. I’m sure if you asked IBRC what the effect of introducing such a prohibition at that bank, it could tell you the effect, and it would be in the tens of millions.
It was the Sinn Fein finance spokesperson Pearse Doherty that posed the question to Minister for Finance, Michael Noonan. This is the full parliamentary question and response.
Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Question 115 of 25 September 2012, if he will provide an assessment of the profit foregone in the National Asset Management Agency as a result of the proscription in section 99 and 202 of the NAMA Act 2009, blocking NAMA from selling assets to borrowers who are in default..
Minister for Finance, Michael Noonan: I am advised by NAMA that Sections 99 and 202 of the NAMA Act 2009 relate to debtor confidentiality, not to the sale of assets.
We assume the Deputy is referring to Section 172 of the NAMA Act which relates to Limitations on certain dealings in land etc. As NAMA is not permitted to sell assets to borrowers in default, neither I nor NAMA are in a position to assess the potential foregone profit (if any) if NAMA were permitted to sell assets to borrowers in default.