DEVELOPERS who still pay themselves lavish salaries despite owing billions to the state face “excessive pain”, a minister claimed last night.
Justice Minister Dermot Ahern said the controversial business arrangements whereby it is believed builders whose loans have been transferred to NAMA may take salaries of up to €200,000 a year and remain in their luxury homes could result in a good return for the taxpayer.
Mr Ahern insisted NAMA was taking a “pragmatic approach” in dealing with the 10 biggest developers, whose borrowings range from €1bn to €3bn.
Under arrangements to deal with their property empires, developers face certain financial targets and conditions and, if they meet their side of the deal, they can remain in their homes.
While NAMA does not approve individual pay rates in the business plans for the troubled developers, it does approve the level of operating costs from which wages come. In return NAMA can take a first charge on the developers homes, meaning they can be sold if the company does not perform as expected.
Developers are also expected to sell off unencumbered assets like helicopters, holiday homes, race horses and art works to help bring their debts down.
Mr Ahern stressed that NAMA was an independent body and had pledged to get the best return possible for the taxpayer.
“Ultimately there will be excessive pain for these people one way or another; either it’s bankruptcy or they co-operate with NAMA.
“All of these people will potentially lose their family homes and all the assets they have. NAMA will endeavour to get a return for the taxpayer from all the developers in trouble. They are taking a pragmatic approach,” he told RTÉ.
The minister added that “time would tell” if NAMA made good on producing a gain for the state on the transactions involved.
NAMA says borrowers have typically reduced the overheads of their businesses by between 50% and 75%.
“These reduced overheads have to cover a broad array of expenses including salaries for relevant executives. NAMA does not specify any individuals salary,” a statement from the agency said.
Negotiations with a number of the developers are ongoing and some are believed to be drawing down no salary.
NAMA is also looking at business plans for the 22 next biggest borrowers whose loans average around €600m. It is believed developers have also been told by NAMA to free up millions of euro being held in retirement funds to produce working capital to help their businesses.
NAMA believes moving against individual developers through the courts to recover assets at this stage would incur more costs on the taxpayer and be time-consuming, according to sources.
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