Tuesday, 2 July 2013

Questions (71)

Sandra McLellan

Question:

71. Deputy Sandra McLellan asked the Minister for Finance further to his response in Dáil Éireann where he set out that 45 National Asset Management Agency developers had a collective amount of €8 billion owing to NAMA when they were declared bankrupt outside of Ireland, if NAMA has made provision for the non-payment of what was owed by these developers on its books and what that means for NAMA's financial outworkings. [31881/13]

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Written answers (Question to Finance)

As advised in response to a recent Parliamentary Question No. 82 of 20th June 2013, NAMA debtors who have been declared bankrupt outside of Ireland had, by reference to the nominal or par value of loans, exposure to debt of approximately €8 billion at the time of NAMA's acquisition of loans from the participating institutions. As also advised, NAMA has enforced over the assets securing these loans and continues to realise these assets.

Bankruptcy proceedings relate, generally, to any remaining unencumbered or unsecured assets held by the bankrupt. The role of the bankruptcy trustee is, therefore, to realise any other residual or unencumbered assets, including property and cash, which the bankrupt may have and to make a distribution to creditors including NAMA. The bankruptcy trustee can also seek to have the bankrupt contribute from post-bankruptcy earnings through an income payment order.

NAMA advises that it does not write off debt as a result of debtors filing for bankruptcy outside the jurisdiction of the State. Rather, it is a matter for the bankruptcy proceedings to deal with the outstanding debt. NAMA advises that even where the bankruptcy is discharged, the bankruptcy estate continues until such time as all assets have been liquidated and the debt, in so far as possible, has been repaid. NAMA advises that, in its position as a secured lender, its experience has been that bankruptcy has not tended to prejudice recoveries.

The Deputy may wish to refer to NAMA’s Annual Report and Financial Statements for 2012, which contains extensive information regarding the Agency’s operations, including, as set out in pages 26-27 in particular, its insolvency activity and on the locus of debtor bankruptcy. The end 2012 financial statements takes account of the financial position of its whole loan book including those debtors that have declared bankruptcy. As with all debtor connections, NAMA conducts regular impairment reviews of connections whose principals have been declared bankrupt. The fact of being declared bankrupt does not in itself necessarily cause the impairment position to deteriorate. NAMA’s security position is not impacted by bankruptcy proceedings.

It is important to point out that debtors are entitled to petition to bankrupt themselves in other jurisdictions if they are entitled to do so under the laws of that jurisdiction. The Deputy will be aware 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 advises that in each instance of bankruptcy involving a NAMA debtor it reviews its options and selects the most appropriate method of ensuring the best possible return for the taxpayer. NAMA advises that it is currently challenging bankruptcy applications on the basis of COMI in two instances and in a further case is supporting the application of another secured bank with a view to having bankruptcy proceedings take place in Ireland.

NAMA advises that in each instance of bankruptcy involving a NAMA debtor it reviews its options and selects the most appropriate method of ensuring the best possible return for the taxpayer. As advised in NAMA’s Annual Report and Financial Statements, the Agency, as a secured creditor, is generally neutral on the locus of bankruptcy proceedings and its experience has been that the location has not tended to prejudice recoveries. This position is based in part on its positive on-going engagement with several bankruptcy trustees of debtors who have been adjudged bankrupt in the UK. The Agency also advises that the bankruptcy regime in the UK is well-established, sophisticated and that bankruptcy trustees 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.

NAMA further advises that the comparatively shorter duration of bankruptcy in the UK is not a consideration for the Agency 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. NAMA advises that it challenges the release from bankruptcy of any debtor in instances where there is non-co-operation with the bankruptcy trustee.