And just to keep the “five” theme going, some of the estimated €5bn in debt owed by NAMA developers just to NAMA will be written off in less than 5 months if Sean Dunne’s Good Friday filing in Connecticut plays out as Sean plans.
I really don’t see how justice minister Alan Shatter’s new bankruptcy law will ever be accepted, when it is finally commenced. If Irish people have to endure a “reformed” set of rules that will impose North Korean-style intrusion into their personal lives as well as reducing people to counting the euros and cents for every single purchase, be it for a jar of coffee or a roll of toilet paper, whilst NAMA developers up sticks, move to another jurisdiction, file for bankruptcy with multi €100m debts, and see themselves emerge financially reborn in a matter of months; surely all of this will spark widespread outrage.
There is a leaked 60-page guide doing the rounds which sets out in some detail how debtors will need curtail their lives if they opt for the new insolvency arrangements which are expected to be launched shortly; the Personal Insolvency Act 2012 was signed into law by President Higgins on 26th December 2012 but Minister Shatter needs to “commence” the Act so that its provisions apply, and because of delays with establishing the personal insolvency service, the infrastructure to deal with the anticipated flood of insolvency applications isn’t up and running yet. But the leaked guidelines indicate that when the arrangements are finally commenced some time this year, a family of four will be “allowed” a food allowance of €560 per month which equates to €5 per person per day, in fact €4.60 if the €560 relates to a calendar month. Personal insolvency is a new process for Irish people and is designed to allow you to pay off some of your debts over a period, 60 months or five years in the case of the Debt Settlement Arrangement, longer and shorter periods apply for other arrangements, as long as you agree to certain actions including living within a budget and selling assets, and at the end, you might see some of your debt written off.
Meanwhile, the tally of NAMA developers filing for bankruptcy outside the Republic of Ireland continues to grow, with Sean Dunne just the latest in the following list.
So, how much has NAMA seen written off as a result of these foreign bankruptcies? It is impossible to tell for a number of reasons but we can have a stab at it. Firstly, we don’t generally know how much is owing to NAMA. Developer A may have had a €2bn loan from Anglo, but NAMA might have acquired that loan for just €1bn. We know that overall, NAMA paid 43c in the euro for the €74bn of loans it acquired from the banks for which it paid just €32bn. Secondly, we generally don’t have access to the bankruptcy papers in other jurisdictions. An exception is the case of John Fleming who filed for bankruptcy in the UK in 2010, and the papers were obtained by the Sunday Times and are available from Gavin Sheridan’s thestory.ie here. The bankruptcy period in the UK, including Northern Ireland, is generally 12 months. John owed nearly €1.1bn.We don’t know how much his assets were worth.
We do know that NAMA obtained €300m judgments against each of the two Grehan brothers, Danny and Ray. They will have had some assets to offset against these judgments, but with Irish commercial property down 70% from peak, development land down 90% and residential down 50%, the chances are that any recovery by NAMA will be minor. NAMA has pursued the Grehans in Canada, the US and Britain to reverse asset transfers, but even these are unlikely to make much of a dent in the €600m judgments in favour of NAMA, and remember they may have debts owing to non-NAMA creditors as well.
Bernard McNamara was regarded as a NAMA Top 10 developer which would mean that he owed an average of €1.8bn to the Agency – NAMA says that the Top 12 owed it €22bn. Again, Bernard will have had some assets to which NAMA had receivers appointed, or which will have been handed over by Bernard as part of the bankruptcy. But we know that Bernard’s €412m Irish Glass Bottle site in Ringsend is worth less than €50m today, so there may be massive losses there also.
Paddy Shovlin was understood to be in the table of Top 20 NAMA developers, and NAMA says the developers occupying positions 13-30 in its league table owed an average of €674m when the loans were acquired by NAMA.
We know that Sean Dunne has, on his initial bankruptcy filing, indicated debts of €400-800m and assets of less than €7m. I can tell you now, that there is huge anticipation amongst an army of observers waiting for Sean Dunne’s statement of financial affairs in the US.
In most other cases, we just have snippets about loans outstanding, and we generally don’t have records of the assets that developers may have had to give up as part of the bankruptcy process. But if the loss is somewhere between 57%, the NAMA evaluation in November 2009, and 98%, Sean Dunne’s claimed position in 2013, then even if the 17 developers had NAMA debts of €100m and if there is a 75% write-off then we are looking at a total to date of over €5bn*. Yes, six of the 24 on the list might be natives of Northern Ireland, and Tom Kane is an American, but the majority are Irish who, for all intents and purposes, have lived and worked in Ireland during the boom when the debts were rung up.
So, on one hand, if you owe €300,000 in Ireland mostly secured on a home that is worth €150,000, the best you might expect from Minister Shatter’s new laws is a five year term of basic rations, after which you might see €50-100,000 written off. Meanwhile, at least 20 NAMA developers have seen an estimated €5bn+ written off, and in Sean Dunne’s case he may be discharged in as little as 120 days. The pat response from ministers in Ireland to suggestions of reducing the burden of the insolvency process is that it will encourage more people to seek debt writedowns from banks which we mostly own. But if it is acceptable to allow 20 people write off €5bn, what is the problem with allowing 30,000 people write off €150,000 each or a total of €4.5bn? And these are just the NAMA developers, we have pop stars, betting shop proprietors cum broadcasters and the less well-known upping sticks and filing for bankruptcy elsewhere leaving colossal debts behind in Ireland.
* John Fleming gross debts €1.1bn, Bernard McNamara estimated gross NAMA debts €1.8bn, Paddy Shovlin estimated gross debts €670m, Grehans gross €600m NAMA debts. Assume 75% write-off of gross debts ie 75% of (1.1bn+1.8bn+.67bn+.6bn)=€3.1bn plus Sean Dunne net debts €600m (mid point of liabilities range less €7m of assets), plus 17 developers at estimated average of €100m gross NAMA debt with 75% writeoff = €1.3bn.
NAMA Wine Lake 
This disparity of treatment is going to be a huge issue. I can envisage that, having observed the way in which (some) big borrowers have been playing ducks and drakes with the law and courts in Ireland, UK and US, many small debtors might also start playing hard ball on the grounds that they have nothing to lose and the taxpayer will end up picking up the tab for them also. Could get very rough and tough for a lot of people.
When Ireland were being humiliated by Xavi and Iniesta, they sang and drank and got teary eyed about the best little country in the world.
When Ireland was being abused by the church, by fianna fail, by the English, by the (fill in the the space………), they sat home and sang and drank and got teary eyed about the best little country in the world.
Revolution, defiance? not a chance.Sure isn’t it the best little country in the world.
Ye think a few developers getting of with billions in unpaid debt will get people off their asses…really?
“By a lonely prison wall
I heard a young man call
Michael they’re abusing you again
for your such an easy mark
never stand up, never bark
now developers are sailing in the bay”
NWL I would suggest you do the little people of Ireland a favour and recommend on you blog that if they are in negative equity and have the ability they should get to the UK as soon as possible. Given how draconian the new Irish Bankruptcy and insolvency legislation is turning out to be.
@Eamonn, what you suggest is all very fine but how is a couple earning, say, €50,000 after one of them lost a job, with a €300,000 mortgage on a house now worth €200,000 and with two school-going children. How are they supposed to “get to the UK as soon as possible”. They would need to establish a centre of main interest in the UK, so what, do they both move which involves one giving up a job, and face into the UK, both jobless. And what about the children? Take them out of school in Ireland for a couple of years. And then mess up their education and social lives again if they decide to return after a bankruptcy discharge. And what about moving costs for people pinned to their collar, that’s €5k there alone. And what about jobs in the UK? And what about their families, friends and life.
Sadly though, and even taking all of the above into consideration, it may still make life-sense for people to do just that. Move to the UK. Because this Government seems resistant to reform which would place Ireland and the UK on a level-playing field.
Ahh, NWL. Not like you…… too many negative vibes. You have to plan ahead. Get a legal separation, head of family moves to the UK, gets a job, establishes COMI, takes Ryanair home at weekends to see kids, files bankruptcy in UK, and returns debt free in 12 months and renews courtship with the missus.
It’s that or 5 years plus under a punitive Shatter insolvency programme designed by the Irish banks for their own benefit.
You choose?
@WSTT, I suppose there are different “leagues” of candidates for bankruptcy. In the premier league, you have people, still with enormous assets though with even more enormous debts or who have independently wealthy spouses or families. On paper, they will have the easiest move, and control over assets and family wealth, should facilitate their way.
In the next division down, you have say the middle class, where husband and wife tend to pool all their assets, they were never wealthy enough to plan for difficult times, but they have some basic savings, maybe €10-20k, and one or both have skills which will enable them to get jobs in the UK without difficulty. This is the division you’re talking about and I know people like this, and yes, for them what you suggest, the separation, the pre-meditation, the move to the UK, the disruption, the weekend Dad (or Mum) may well be worth it when looked at from a lifetime’s point of view.
There are lower divisions though where people are at their wits ends and where the €5k say needed for a move of any sort just isn’t there, let alone legal fees for a separation, or perhaps job skills which would transfer easily. And they’re pinned to their collar and have difficulty coping with basic day to day life, let alone something of the scale needed to seek bankruptcy in the UK. Yes, I am negative on the circumstances and prospects for this division, but even here, it may make sense to try to deal with all the difficulties to get a UK bankruptcy. Outrageous and shameful that they don’t have an equal opportunity in Ireland, where they could at least give their custom to Irish insolvency practitioners and Irish bankruptcy officials.
There could also be a group (size unknown) whao are at “wits end”, can’t/won’t go to the UK/NI and who refuse to fully engage in the Irish bankrupcy processes as regards their mortgages. Will banks respond by evicting or jailing them or trying to do so? How might the public at large react to such moves given the “example” being set by some big borrowers? How would politicans react to eviction and jailing of constituents?
Bankruptcy is not a choice that anyone makes lightly. In the end it is taken because people are left with no other choice. We are all basically over-optimistic. No matter what financial strata we come from, it is always the last choice. In truth most people would be better making it earlier and putting their debts behind them, rarher than delaying the inevitable and allowing life and new opportunities to pass by.
If you move to the North you can avail of the same regime and don’t even need to get the Ryanair home. Might struggle to get the job you want though.
The debts have been written off for the Men of Quality. The plebs can just accept their lot.
I really don’t get your point. Are you trying to imply that Shatter is complicit in NAMA developers not paying their loans- you are being very disingenuous and frankly dishonest when you write “if it is acceptable to allow 20 people write off €5bn” – who is claiming that it is acceptable?
@MG
“But if it is acceptable to allow 20 people write off €5bn, what is the problem with allowing 30,000 people write off €150,000 each or a total of €4.5bn?”
“The pat response from ministers in Ireland to suggestions of reducing the burden of the insolvency process is that it will encourage more people to seek debt writedowns from banks which we mostly own”
It is unacceptable to the Government to have a mad dash of people seeking debt write downs. This is defended on the basis that we own the banks and the nation would need foot the bill. So the point being made is that the 20 people with €5bn of debt writedowns has already happened and we own the banks suffering the writedown and we as a nation are footing the bill. Not sure how to make that clearer.
Glib response. You have avoided the thrust of my response. I know perfectly well that NAMA developers have gone abroad and won’t pay back their debts. There’s SFA that I, you or Shatter can do to prevent this. If there is please let me know. in fact please let me know what exactly Shatter could or should have done to prevent this from happening.
Do you think that throwing another 5bn down the swanee is somehow more acceptable because a handful of big guys have already shafted us for 5Bn?
Your rant is more in keeping with some populist “debt forgiveness” piece in the Sunday Independent.
@MG, as much as it cuts me to the quick being compared to the Sunday Independent – the newspaper which gave an unfettered platform to Sean Dunne to address “the people of Ireland” – let me try to recover and say that although there is nothing to stop a citizen from moving their COMI and pursuing bankruptcy elsewhere, it undermines the political argument that citizens remaining at home can’t have debt forgiveness because of the losses that would be imposed on banks, because similar losses are being run up by a small group of citizens who have moved.
I’ll say this; I wonder if part of the reason for the strictness is due to the high number of those debtors who are in the employ of the State – if the CPA can’t be renegotiated (properly), well at least the crazy State wages will be funneled back to the banks…
@nwl
to state the bleedin’ obvious……
1 developers cost to the state = 4500 average persons cost to the state….
if everyone were to go abroad for bankruptcy and leave unpaid bills behind.
(using for illustrative purposes: average developer debt is 650 mill and average, regular homeowner debt is 150,000)
Maybe this helps show the unfairness of the situation, which I think is your general point.
The personal insolvency system is not so bad for the sub 20k debt zone but is almost useless to people with mortgages. You essentially end up where you are today after 7 years of effort (and having to listen to a multitude of Politicians and Journalists informing you of what you should be doing). The 3 year bankruptcy is progress (+ 5 year potential claw-back), it is modern in comparison to the existing 12 year system that has no automatic discharge i.e. you could be a bankrupt for life.
Progress, but if you are going to go down the road of bankruptcy (HAND BACK THE KEYS AND WALK) why bother with 3 years when our nearest neighbor will do it in 1.
It doesn’t matter a great deal what social class you are in when faced with personal bankruptcy, you have to get to ZERO before you can rebuild. Your social class has a big effect on rebuilding your financial life once you get to ZERO.
It make social and economical sense to get back into productive life ASAP (regardless of social class), this is the real issue. An insolvent company can be wound up and creditors dealt with in a matter of months in Ireland today, why is it appropriate to deal with an insolvent Company efficiently and economically and not deal with personal insolvency in a similar efficient and economical manner?
I am not an economist but it seems to me that when we re-capitalised the banks we re-imbursed them the full value of their outstanding mortgages. All mortgages, performing or otherwise, would have been listed as a liability. So it must follow that they no longer have any debts that can be attributed to mortgages. Yes, it is true that legally anyone who has a mortgage with a bank still has that mortgage but the success or failure of the banks is not going to rest on that mortgage being paid off. There is room to manoeuvre. But is there the political will to do so and we mustn’t forget that we do live in a country where begrudging is alive and well.
@LC, what you write is partly true. In March 2011, we estimated the losses in the banks from mortgages that would go bad and we gave the banks money to absorb those anticipated losses. So, the banks aren’t covered for 100% of their mortgages going 100% bad, but they are covered for a significant portion of them going bad, with the bank just left with the underlying security. So, the banks don’t have enough to write off every mortgage but from recollection, they have €9bn to absorb losses on mortgages.
wonder how many loans have been parcelled up and sold on.? In other words, do the banks still own the debt, or some vulture who bought the debt at ? in the euro
Lest we forget.
“If there is one message I want to be absolutely clear about, it is that NAMA is not designed to be and will not be permitted to operate in practice as a bail-out mechanism for developers who have operated irresponsibly. The amount a borrower owes will not change because of the transfer of a loan to NAMA. The Agency will have a statutory duty to maximise the tax payers’ return and will therefore be expected to use its entire means to this end. The Bill also provides the Agency with a wide range of powers it needs to pursue borrowers and enforce security. In some cases this will mean that borrowers’ personal assets will have to be assumed by NAMA”
http://www.finance.gov.ie/viewdoc.asp?DocID=6013
Other assurances.
http://www.finance.gov.ie/viewdoc.asp?DocID=5875
http://www.finance.gov.ie/viewdoc.asp?DocID=5986
Think about the regime that allows people to declare bankruptcy and come out of it a year afterwards.
We are all fed the line that people who run businesses deserve their outrageous salaries because of the “risks” they take.
What risk? Living on a tight budget for a year after hiding a few million in an offshore account somewhere? Or “in their spouses name”? Then getting back in business with the slate wiped clean?
Talk to your EU and American friends about this nonsense. America is geared to let criminals away with fleecing the population. So is Britain
The fact that there are “deserving cases” who were caught up in the Irish Property Bubble is putting a gloss on this. That is neither here nor there. The system is designed to keep the 1% in money and power and let the taxpayer foot the bill.
@NWL
I know what you mean that it might be very difficult but I think you would be doing the little guy a favour if you and others came out saying that “if at all possible , given how limited the new legislation is, you would be much better off moving your center of interest to NI or elsewhere in the UK for 1 year”. No body in the media is giving them this advise. The government are advising them to engage with the bank now. If credible voices started saying that the legislation is still so bad it is still well worth your while moving, and the idea got momentum it might even convince the government to make the legislation less banker friendly.
I would certainly advise any of my friends in the vast majority of circumstances to do it.
To paraphrase Marx
“Negative equity people Ireland arise from your knees and high tail it to the North (unemployment 7%) you have nothing to loose but your chains”
[…] This comes while many people who owe the actual state larger amounts of money, is about to be let off the total hook to the tune of FIVE BILLION euro, scot free. They owe at least by a conservative estimated the €5 billion to NAMA alone who are looking for some unannounced reason, to have this debt quietly disappear off their books. The amount will be its reported, written off in less than 5 months. LINK […]