Nama: ‘No comment’ on claims it hiked interest rates after developers’ State aid complaint
BOTH Nama and the Department of Finance have refused to comment on claims the agency moved to increase the interest rates it applies to loans given to Nama-supported developers and receivers, only after a complaint had been made to the European Commission alleging it was breaching EU rules on State aid.
Last December, a group of five developers — Michael O’Flynn, Paddy McKillen, David Daly, New Generation Homes CEO Patrick Crean and MKN Group director Brian McKeown — filed a complaint with Europe’s competition directorate. In their subs-mission, they asserted Nama had not only gone beyond the original remit for which it had been given the Commission’s approval, but was now giving Nama-supported developers a significant financial advantage over non-Nama developers through the provision of loans at preferential rates.
Based on an analysis conducted on their behalf by the economist Jim Power, they estimated Nama’s current cost of capital (borrowing) to be approximately 2.5pc, allowing it to provide Nama-supported developers with an aggregate interest rate of around 6pc on their loans — as opposed to the 14pc to 15pc that “non-Nama-supported developers” could expect to avail of.
Responding to a parliamentary question on the matter from Fianna Fail finance spokesman Michael McGrath last Wednesday, Finance Minister Michael Noonan said: “Nama intends to extend funding to willing Nama debtors and receivers on commercial arms-length terms”.
A note to his response said the rates offered to Nama debtors and receivers were “unrelated to Nama’s own cost of funding” and were provided at “appropriate market rates of interest”.
Speaking to the Sunday Independent, a number of developers claimed the interest rates imposed on Nama-supported developers had only been increased recently. They said the move had caused serious disquiet and prompted tension amongst certain Nama-supported developers who had now seen their cost of borrowing increase.
Asked to confirm when exactly Nama had introduced the requirement referred to by the Finance Minister in his Dail response for “appropriate market rates of interest” on loans to Nama supported developers, both Nama and the Department of Finance declined to make any comment, other than to confirm they were co-operating with the European Commission’s ongoing investigation.
In a brief statement on the matter, a spokesman for Nama said: “Nama continues to work closely with the Department of Finance and the European Commission on this matter and has nothing to add to the Minister’s parliamentary question response at this time.”