“An Individual Voluntary Arrangement* would have produced a much greater financial return to NAMA and my other creditors. However, I have been advised that NAMA would never, and had by then never, engaged constructively with an IVA and so my only real option, in the absence of being able to satisfy the demand was to petition for bankruptcy. “ Businessman John Fraher’s affidavit in his unsuccessful defence against NAMA’s application for a €5.9m judgment
This may not be a first, but it is the first that has made it into the media. Kerry developer John Cahillane is attempting to negotiate what the Brits call an Individual Voluntary Arrangement or “IVA” – see below* for summary explanation. This is an alternative to bankruptcy and is roughly akin to our Personal Insolvency Arrangement which allows for assets to be disposed of, for the debtor to work with their creditors over a period of time, and to provide what would usually be a better result for creditors.
In John’s case, he claims that if he files for bankruptcy, his unsecured creditors will receive 0c in the euro but through an IVA they will receive about 13.5c in the euro. John Cahillane says he has assets of €56m and liabilities of €73m. This is a Part 1 of a 2-part blogpost, Part 2 tomorrow will examine the IVA proposal in detail but in essence, John is trying to get NAMA to accept that its recourse is only to the property securing the loans, and John is saying he will make a €60k-odd contribution to the IVA from third party contributions – maybe from his wife, but that doesn’t appear to be specified – and from equity in his family home.
NAMA moved against John’s company in December 2011, having KPMG appointed as receivers to Cloonbeg Developers Limited. It would appear from the IVA that John subsequently relocated to the UK, his present address is in Kilburn, north London and he says he informed his creditors of this relocation in January 2013. He is presently employed as a business development executive with Purcell Development Services Limited, a new company in which John “identifies new development and construction projects for investors in the UK and Europe”.
John’s property businesses were based in Ireland (mostly Kerry, it seems), Portugal, mainland Spain, the Canary Island and Cape Verde.
John’s biggest creditor at €54m is NAMA following NAMA’s acquisition of AIB loans, and NAMA has apparently taken a negative position on the IVA proposal. This is seemingly a policy stance at NAMA, because John Fraher in a completely unrelated court matter last week, said in his affidavit that NAMA won’t entertain IVAs. NAMA was asked today to comment on its position on this IVA proposal, and also about its general stance towards IVAs. There has been no response at time of writing.
Other creditors, apart from NAMA, which comprise a minority of the €73m of debts, are more supportive – creditors in a Cape Verde scheme apparently owed €11m are supportive. There is a creditors meeting scheduled for Friday 10th May 2012 in London to determine the way forward. The London City branch of English accountancy firm, MHA MacIntyre Davis is acting on behalf of John Unfortunately John needs 75% of his creditors to agree to the proposal, and the scheme will fail unless NAMA accepts it.
What is an IVA?
Alternative to bankruptcy, akin to our personal insolvency scheme, but has very significant differences.
Term, can be days but typically is for five years, six if the IVA doesn’t force the sale of the family home
Assets and liabilities, like a bankruptcy, most assets are generally liquidated to pay the liabilities.
Pension pots, generally protected.
Family home. If your home is worth more than its mortgage, usually you’re required to re-mortgage and pay the equity into the IVA. If you can’t then your IVA period may be increased by 12 months.
Income. Like the personal insolvency scheme, you work out with your Insolvency practitioner, or IVA practitioner, what you need to live on and the rest gets paid into the IVA, which pays the practitioner and your creditors.