BUSINESS OPINION:The McInerney examinership case raises plenty of questions that need to be answered

THE BEHAVIOUR of the banks in the McInerney examinership is so puzzling – if not alarming – that it is hard to know where to start. A quick summary for those who have not been following this tortuous tale might be best.

Three weeks ago the High Court rejected a rescue plan for the company that would have involved a €45 million investment by US fund Oaktree.

The banks argued – and the court accepted – that the deal was prejudicial to them and that they would do better if they were allowed run the company down over 11 years.

It subsequently emerged that two of the banks – Anglo Irish Bank and Bank of Ireland – actually plan to transfer their loans into the National Asset Management Agency as soon as possible. This would appear completely at odds with their plan to run the company down over over 11 years.

Once this was brought to his attention, Mr Justice Frank Clarke agreed to reconsider his decision and the matter is back in court later this week. The probability the loans would be transferred to Nama was a material fact not before the court when his decision was made, according to Mr Justice Clarke.

We will know shortly whether or not it actually makes any difference – Mr Justice Clarke will decide.

But whatever decision he comes to there are a few questions that could do with answers. The first of course is why the banks did not make it clear that €80 million of the €113 million owed by McInerney was earmarked for Nama?

Equally, it would be interesting to know if the banks really thought that the fact the loans were going into Nama would not become an issue, given that it could not happen without McInerney’s involvement?

Another not strictly relevant question is how they managed to bungle the whole thing in the end, by starting the transfer process before the ink was dry on the High Court judgement?

These questions need answers because of what they will say about the attitude of the banks some two and a half years into a taxpayer rescue costing tens of billions.

More specifically: Why are these institutions – one of which is 100 per cent owned by the State – acting in their own narrow interests with, it appears, no real thought to what might be called the national interest?

This in turn raises the question as to whether Nama should be more proactive in such situations to ensure that the longer-term interests of the taxpayer are served.

The issue that seems to have been lost sight of in the McInerney situation is the wider significance of the Oaktree investment. The Los Angeles-based fund is one of the few international investors openly talking about investing in Ireland. They are obviously opportunistic investors and see the chance to make money on McInerney, possibly as a vehicle by which to invest further in distressed Irish property and related assets.

The involvement of Oaktree and its ilk are very much part of any scenario that sees a recovery in the property market being kick-started, which is a prerequisite for Nama making a profit and paying off its debts - well, actually our debts of €40 billion. It is one of the less palatable truths about the Irish recovery that some people will have to make an awful lot of money out of property and they probably will not be Irish.

Once you have got past that, it seems pretty obvious that the encouragement of overseas capital is probably an overriding objective at this point.

It would be asking too much to expect Anglo Irish and Bank of Ireland to act in such a fashion unprompted, given that they have other competing objectives. No doubt they think that the minimisation of their losses should be the priority.

However, Nama – or more correctly the National Treasury Management Agency – should be in a position to look at such situations and take a wider view. But, in this case, Nama seems to have been prepared to take a back seat and let events unfold. In its defence the agency is obviously stretched and fighting some much larger fires.

But the need for some sort of co-ordination and strategic thinking is obvious and will become more so as Nama starts to try to dispose of more properties. Otherwise there will be more incidents of Ireland in effect shooting itself in the foot.

The National Treasury Management Agency holds the Government’s stakes in the various banks and is also the parent body of Nama. Well placed, one would have thought, to knock heads together as necessary.