Inter-company loans may be to blame for collapse

NAMA DECISION:INTER-COMPANY LOANS may have been behind the collapse of Michael McNamara and Co, which was placed in receivership late on Thursday night.

The company, controlled by developer Bernard McNamara, shut down work on a range of sites across the country yesterday morning after the State’s toxic assets agency, Nama, placed it under the control of Dublin firm Farrell Grant Sparks (FGS).

After several months of talks between the agency and the company’s management, Nama rejected the firm’s business plan, and appointed FGS partner Pearse Farrell as receiver to the business.

Nama did not comment beyond a brief statement saying that it had appointed FGS with the agreement of Michael McNamara and Co.

Nama has the right to appoint receivers to businesses whose loans it has taken over if it believes that their business plans, which are meant to demonstrate how they intend repaying the agency, are not viable.

The company was one of the biggest building and civil engineering contractors in the country, as it was also one of the most active in that sector.

Up to yesterday, it was working on projects that included a new building at NUI Galway, a hospital block at Letterkenny General Hospital in Donegal and on the Institute of Technology, Tallaght, in Dublin.

It has worked on national road projects such as the N7 Dublin-Limerick route, the €25 million research library for University College Cork, the €140 million new hospital block at St Vincent’s in Dublin and just recently finished a €17 million project for Mary Immaculate College in Limerick.

Earlier this year, Mr McNamara, who is separately being pursued by his creditors, said that the company was viable. He stepped down as a director and from any managerial roles held in the group to ensure that his personal financial woes had no impact on the business.

It is understood that, in common with many other businesses in its industry, it ran into difficulty with inter-company loans.

Typically, building contractors loaned cash to companies within their groups that were involved in property speculation and development. Most of these debts are unlikely to be be repaid.

It is not possible to say what Michael McNamara’s exposure to this is, as it is an unlimited company and does not publish accounts.

Industry sources also pointed out yesterday that the company has been bidding for projects at prices that would have made it little or no profit in order to ensure that work and cash continued to flow into the business.

Workers and subcontractors who arrived at sites being operated by McNamara yesterday were shocked to find them closed and to be told that their services were not required from that point.

Pat Harte, whose firm P Harte and Co had been working on the Institute of Technology, Tallaght, site, said that he had been expecting Michael McNamara and Co to pay him €200,000 that it owed his business yesterday.

Instead he said that he believes that he will get nothing as the debt is not secured, and other creditors will take precedence.

It is not known at this stage how many subcontractors will be hit by the receivership.