Landmark ruling

Millionaire only not · 26-11-2019 7:29am #1

https://www.independent.ie/irish-news/courts/landmark-debt-deal-to-save-assetrich-cashpoor-farms-38726937.html

Any thoughts on this , good or bad deal ?
Is this what really going on with some dairy farms and not as profitable as the figures suggest ?

It’s a roof over there head and get to keep the farm for now !
Is it not just prolonging the agony ?

jaymla627 · 26-11-2019 9:50am

Millionaire only not wrote: »

https://www.independent.ie/irish-news/courts/landmark-debt-deal-to-save-assetrich-cashpoor-farms-38726937.html

Any thoughts on this , good or bad deal ?
Is this what really going on with some dairy farms and not as profitable as the figures suggest ?

It’s a roof over there head and get to keep the farm for now !
Is it not just prolonging the agony ?

Irish dairy farms especially ones that have expanded and spent small fortunes are highly profitability once capital repayments/tax and drawings arent factored in, same bulls**t message in latest Irish dairy farmers magazine the actual profitability of featured farms wasnt once shown except the Denmark farm and he was more a example of how high output systems are debt laden

Lime Tree Farm · 26-11-2019 9:53am

"The six-year holiday on repaying the principal will give the couple breathing space to repay unsecured creditors, owed around €220,000. No interest accrues on unsecured debt in a PIA.
The repayment of unsecured debt - debts not backed by an underlying asset such as a house or land - is seen as vitally important. Unsecured creditors can include service providers such as silage contractors, creameries and vets, whose goodwill is essential for the farm to prosper in future. https://www.independent.ie/business/farming/news/courts/landmark-deal-as-couple-get-25-years-to-repay-debt-on-1-5m-farm-38726937.html "

Bit of a sting in the tail for Merchants, Vet, Contractors - puts them in a bind going forward hoping they will get paid for past debts first.

bcklschaps · 26-11-2019 10:05am

The "goodwill" of creditors who are owed money might be tested though. Future services might need to be paid for up front.

Lime Tree Farm · 26-11-2019 10:08am

bcklschaps wrote: »

The "goodwill" of creditors who are owed money might be tested though. Future services might need to be paid for up front.

They could be in a Catch 22 situation.

BarryD2 · 26-11-2019 10:26am

bcklschaps wrote: »

The "goodwill" of creditors who are owed money might be tested though. Future services might need to be paid for up front.

If you're self employed you watch your customers on credit and only get caught once!

jaymla627 · 26-11-2019 10:51am

Lime Tree Farm wrote: »

"The six-year holiday on repaying the principal will give the couple breathing space to repay unsecured creditors, owed around €220,000. No interest accrues on unsecured debt in a PIA.
The repayment of unsecured debt - debts not backed by an underlying asset such as a house or land - is seen as vitally important. Unsecured creditors can include service providers such as silage contractors, creameries and vets, whose goodwill is essential for the farm to prosper in future. https://www.independent.ie/business/farming/news/courts/landmark-deal-as-couple-get-25-years-to-repay-debt-on-1-5m-farm-38726937.html "

Bit of a sting in the tail for Merchants, Vet, Contractors - puts them in a bind going forward hoping they will get paid for past debts first.

In this case the dairy farmer mighten even be getting a milk cheque our only a fraction of it if using the co-op trading account to stay going, like the case down in Cork when lads start falling badly behind in paying its better to cut them loss quickly, then living in hope you'll get it all paid back

_Brian · 26-11-2019 11:22am

Bigger question, is there a business management or financial management issue going on here.

Previous posters wondering since milk is profitable how did this happen, even a profitable business can be so poorly ran that it looses money and gets in trouble.

It’s great they are getting breathing space, but if the underlying problem isn’t addressed this is only a temporary reprieve from the inevitable.

Millionaire only not · 26-11-2019 11:41am

_Brian wrote: »

Bigger question, is there a business management or financial management issue going on here.

Previous posters wondering since milk is profitable how did this happen, even a profitable business can be so poorly ran that it looses money and gets in trouble.

It’s great they are getting breathing space, but if the underlying problem isn’t addressed this is only a temporary reprieve from the inevitable.

Wouldn’t think there the only ones !
live and farm like a miser if u want to have profit !

blackbox · 26-11-2019 1:51pm

Lenders will factor in the additional cost set by this precedent into future loans.

wrangler · 26-11-2019 2:13pm

Millionaire only not wrote: »

https://www.independent.ie/irish-news/courts/landmark-debt-deal-to-save-assetrich-cashpoor-farms-38726937.html

Any thoughts on this , good or bad deal ?
Is this what really going on with some dairy farms and not as profitable as the figures suggest ?

It’s a roof over there head and get to keep the farm for now !
Is it not just prolonging the agony ?

Is that one of Irelands' Fittest Family contestants

Millionaire only not · 26-11-2019 2:38pm

wrangler wrote: »

Is that one of Irelands' Fittest Family contestants

Bit harsh they went to Conor McGregor fights in Las Vegas it would rule them out of getting a deal ! Lol

enricoh · 26-11-2019 2:43pm

blackbox wrote: »

Lenders will factor in the additional cost set by this precedent into future loans.

Yup, mortgage rates here are twice the EU average coz of lack of repossessions

Bass Reeves · 26-11-2019 4:23pm

Interest rate on mortgage was crazy over 5%. Start mortgage is a company that lends above the general market rate to clients that unless everything goes ok can become s stressed borrower.

Rate on other loans Dow to between 2-3% rates may have be at 5% or higher. Saw figures for one year small credit union loans of over 9% lately. On deposit there is no interest paid. Something wrong when there is that gap between rates.

The old banking idiom of the 3X3 was pay 3% interest, lend at a 3% margin above that and go golfing at 3pm.

Most lending now is crazy. Car rates of 6+% personal rates of above that, insurance companies charging 9-14% for staged payments list goes on

Neither a begger or a lender be is more and more apt

26-11-2019 5:54pm

Bass Reeves wrote: »

Interest rate on mortgage was crazy over 5%. Start mortgage is a company that lends above the general market rate to clients that unless everything goes ok can become s stressed borrower.

Rate on other loans Dow to between 2-3% rates may have be at 5% or higher. Saw figures for one year small credit union loans of over 9% lately. On deposit there is no interest paid. Something wrong when there is that gap between rates.

The old banking idiom of the 3X3 was pay 3% interest, lend at a 3% margin above that and go golfing at 3pm.

Most lending now is crazy. Car rates of 6+% personal rates of above that, insurance companies charging 9-14% for staged payments list goes on

Neither a begger or a lender be is more and more apt

Over €2 billion in car loans taken out in this country at the moment. When we were younger my father had a very simple rule for machinery and cars etc , “ if you don’t have it then you don’t buy it “ ,

wrangler · 26-11-2019 5:58pm

1373 wrote: »

Over €2 billion in car loans taken out in this country at the moment. When we were younger my father had a very simple rule for machinery and cars etc , “ if you don’t have it then you don’t buy it “ ,

No one would have anything if that was the case.
My father said ''if you can't afford it new you can't afford' it'
But that was when a few cattle would buy a tractor.
Not that he ever bought much too poor from paying for land

Bass Reeves · 26-11-2019 6:10pm

wrangler wrote: »

No one would have anything if that was the case.
My father said ''if you can't afford it new you can't afford' it'
But that was when a few cattle would buy a tractor.
Not that he ever bought much too poor from paying for land

There was and still is by a minority huge snobbery regarding 2nd hand cars and machinery. But we have gone from where a car had an average lifespan of 7-8 years where some models have lifespans touching 17-18 years. I only ever bought one new car.isyly I target cars of 4yeats old that will give us 6-7 years of fairly mechanical free driving. Altnought this year for myself I bought a 9year old lowish milage RAV.. in general O buy straight and what ever I get for the car we had is a bonus.

Last two cars we had my children took. But debt and interest rates a huge issue if you cannot manage same. Borrowing 20k over 5years @7% interest will cost you 3.5k.

Mooooo · 26-11-2019 6:22pm

Bass Reeves wrote: »

Interest rate on mortgage was crazy over 5%. Start mortgage is a company that lends above the general market rate to clients that unless everything goes ok can become s stressed borrower.

Rate on other loans Dow to between 2-3% rates may have be at 5% or higher. Saw figures for one year small credit union loans of over 9% lately. On deposit there is no interest paid. Something wrong when there is that gap between rates.

The old banking idiom of the 3X3 was pay 3% interest, lend at a 3% margin above that and go golfing at 3pm.

Most lending now is crazy. Car rates of 6+% personal rates of above that, insurance companies charging 9-14% for staged payments list goes on

Neither a begger or a lender be is more and more apt

My land loan when taken out the bank have a margin of 3.5%. Cost of funds atm is 0.43% on a a variable

grassroot1 · 26-11-2019 9:22pm

Good luck to those how got the deal but it just makes it harder for the rest of us to source finance

Millionaire only not · 26-11-2019 10:10pm

grassroot1 wrote: »

Good luck to those how got the deal but it just makes it harder for the rest of us to source finance

I don’t know does it make it harder to get money , if ur books are good Ull get it if there not ur better off without it !

Long story short banks are tramps !
and vultures there name says it all !

26-11-2019 10:46pm

grassroot1 wrote: »

Good luck to those how got the deal but it just makes it harder for the rest of us to source finance

Don’t know what to make of the deal , 25 years working for a fund ,hard to face into that

mycro2013 · 26-11-2019 11:07pm

Not a great deal and I know everyone has a duty to repay any finance taken out. Compare it to residential mortgages of the same value and the debt write off which these have received is substantial.

A bit of a click bait article, wont offer much solace to those currently going through the courts as a precedence has been set. No mention of which side pays legal fees.

MIKEKC · 30-11-2019 5:40pm

_Brian wrote: »

Bigger question, is there a business management or financial management issue going on here.

Previous posters wondering since milk is profitable how did this happen, even a profitable business can be so poorly ran that it looses money and gets in trouble.

It’s great they are getting breathing space, but if the underlying problem isn’t addressed this is only a temporary reprieve from the inevitable.

Hard to see that repayments can be met. Farm valued over 1 million. Must be around 100 acres or less. How can this provide a living and make repayments? There must be other factors which we are not aware of.

Bass Reeves · 30-11-2019 8:32pm

MIKEKC wrote: »

Hard to see that repayments can be met. Farm valued over 1 million. Must be around 100 acres or less. How can this provide a living and make repayments? There must be other factors which we are not aware of.

It would be the book value of the farm as opposed to the market value. Could be double the size you might think

wrangler · 30-11-2019 9:11pm

MIKEKC wrote: »

Hard to see that repayments can be met. Farm valued over 1 million. Must be around 100 acres or less. How can this provide a living and make repayments? There must be other factors which we are not aware of.

Maybe that's all the security they were given, They never got all my deeds after the first run in with them

MIKEKC · 30-11-2019 9:42pm

Bass Reeves wrote: »

It would be the book value of the farm as opposed to the market value. Could be double the size you might think

That's what I mean we haven't all the facts

Bass Reeves · 01-12-2019 11:41am

wrangler wrote: »

Maybe that's all the security they were given, They never got all my deeds after the first run in with them

Banks insist on a personnel guarantee unless they get collateral that way exceeds the value of the loan or where there are multiple loans in place as in this case.

MIKEKC wrote: »

That's what I mean we haven't all the facts

Farm is valued at 1.5 million and family home is not included. It is quite possible family loan is build on the farm and would not realize the mortgage amount if sold separate.

Non secured loans amounted to 288K will be paid off in 6 years bot no interest added to payments. more than likely part of the agreement is that is that new bills are cleared monthly. This would mainly be contractor and co-op/merchant debt.

Mortgage debt is 388K. they stated this is what is owed it more than likly included accrued interest but the rate was 5.5% and will be reduced to 3%.

Rest of loans reduced to 2% a total of 510K. I think as long as the majority of debtors are willing to agree that a PIA can be put in place,

More than likely House is in the middle of the farm and might struggle to sell for half its value. It was in Starts Mortagage interest to do a deal as well as unsecured creditors. that is the majority of the creditors, Maybe obe of the other creditors fell in with that as well. If taht was the case it was easy to get over the line after that.

The real question is cann they afford to pay it. Interest alone for dirst six years is 20K/year. Unsecures is nearly 50K/year over the sis years. They will have to find nearly 6K/ month for six years and about 75k/year after that for next 14 years.

jaymla627 · 01-12-2019 12:31pm

Bass Reeves wrote: »

Banks insist on a personnel guarantee unless they get collateral that way exceeds the value of the loan or where there are multiple loans in place as in this case.

Farm is valued at 1.5 million and family home is not included. It is quite possible family loan is build on the farm and would not realize the mortgage amount if sold separate.

Non secured loans amounted to 288K will be paid off in 6 years bot no interest added to payments. more than likely part of the agreement is that is that new bills are cleared monthly. This would mainly be contractor and co-op/merchant debt.

Mortgage debt is 388K. they stated this is what is owed it more than likly included accrued interest but the rate was 5.5% and will be reduced to 3%.

Rest of loans reduced to 2% a total of 510K. I think as long as the majority of debtors are willing to agree that a PIA can be put in place,

More than likely House is in the middle of the farm and might struggle to sell for half its value. It was in Starts Mortagage interest to do a deal as well as unsecured creditors. that is the majority of the creditors, Maybe obe of the other creditors fell in with that as well. If taht was the case it was easy to get over the line after that.

The real question is cann they afford to pay it. Interest alone for dirst six years is 20K/year. Unsecures is nearly 50K/year over the sis years. They will have to find nearly 6K/ month for six years and about 75k/year after that for next 14 years.

You"d need to be producing over 1.5 million litres a year to service them kind of debts and still pay yourself a wage to provide for family, if business isn't incorporated and if capital allowances start to run out, it would be nearly impossible to keep on top of it if revenue is taking a nice chunk of profits needed to meet capital repayments along with pay yourself a wage, their also wont be a euro for maintenance and improvements on farm, if they had sold some land to help take the pressure of they might of had some chance but unless their is a significant dairy herd in place and facilities, they will be back up in court in a few years

MIKEKC · 01-12-2019 6:48pm

jaymla627 wrote: »

You"d need to be producing over 1.5 million litres a year to service them kind of debts and still pay yourself a wage to provide for family, if business isn't incorporated and if capital allowances start to run out, it would be nearly impossible to keep on top of it if revenue is taking a nice chunk of profits needed to meet capital repayments along with pay yourself a wage, their also wont be a euro for maintenance and improvements on farm, if they had sold some land to help take the pressure of they might of had some chance but unless their is a significant dairy herd in place and facilities, they will be back up in court in a few years

If the banks didn't think it would work you would wonder why they agreed to it

Mortelaro · 01-12-2019 8:31pm

74000 euros p.a to start and creditors before a red cent goes into paying for any production costs...
Theres no way that farm is only a 100 acres
You'd want a 10c margin on 1.5 million litres ie a 150k profit

Bass Reeves · 01-12-2019 11:56pm

Mortelaro wrote: »

74000 euros p.a to start and creditors before a red cent goes into paying for any production costs...
Theres no way that farm is only a 100 acres
You'd want a 10c margin on 1.5 million litres ie a 150k profit

I do not know where lads get the idea that this is a 100,acre farm .I expect it nearer 300

MIKEKC · 02-12-2019 6:24pm

Bass Reeves wrote: »

I do not know where lads get the idea that this is a 100,acre farm .I expect it nearer 300

I presume it was from the value stated. As someone pointed out all the land might not have been given as security. The fact that the bank agreed to the terms would indicate that the farm was much larger giving it a chance to make the repayments . I would hate to be making repayments into old age

Bass Reeves · 02-12-2019 7:12pm

MIKEKC wrote: »

I presume it was from the value stated. As someone pointed out all the land might not have been given as security. The fact that the bank agreed to the terms would indicate that the farm was much larger giving it a chance to make the repayments . I would hate to be making repayments into old age

Presuming a farm valued at 1.5million is only 100acres is not really a valid assumption

02-12-2019 8:04pm

Bass Reeves wrote: »

Banks insist on a personnel guarantee unless they get collateral that way exceeds the value of the loan or where there are multiple loans in place as in this case.

Farm is valued at 1.5 million and family home is not included. It is quite possible family loan is build on the farm and would not realize the mortgage amount if sold separate.

Non secured loans amounted to 288K will be paid off in 6 years bot no interest added to payments. more than likely part of the agreement is that is that new bills are cleared monthly. This would mainly be contractor and co-op/merchant debt.

Mortgage debt is 388K. they stated this is what is owed it more than likly included accrued interest but the rate was 5.5% and will be reduced to 3%.

Rest of loans reduced to 2% a total of 510K. I think as long as the majority of debtors are willing to agree that a PIA can be put in place,

More than likely House is in the middle of the farm and might struggle to sell for half its value. It was in Starts Mortagage interest to do a deal as well as unsecured creditors. that is the majority of the creditors, Maybe obe of the other creditors fell in with that as well. If taht was the case it was easy to get over the line after that.

The real question is cann they afford to pay it. Interest alone for dirst six years is 20K/year. Unsecures is nearly 50K/year over the sis years. They will have to find nearly 6K/ month for six years and about 75k/year after that for next 14 years.

If they are able to make the money to pay those figures, then they will also have a tax bill of over €20000 yearly. Based on your sums then it looks impossible

Mooooo · 02-12-2019 8:10pm

What way is the debt gonna be viewed tax wise? Creditors would be taken pre tax but capital on land will be post tax

Bass Reeves · 03-12-2019 10:14am

Mooooo wrote: »

What way is the debt gonna be viewed tax wise? Creditors would be taken pre tax but capital on land will be post tax

I imagine the loans were for milking faculities etc so it may well be all allowable against tax except the mortgage. That will cost over 10/year in interest for first 6 years and 30K/year to pay off over the 14 year period. Rest of loans.

Hard to see where the money will come from over the next 19 years. They will need to generate about 100K/year for next 19 years in payments every year along with taking a wage to live on and normal running costs. They need to be producing 2 million litres/year. That is around 300 very good cows. You are into labour costs then as well.

03-12-2019 11:46am

Mooooo wrote: »

What way is the debt gonna be viewed tax wise? Creditors would be taken pre tax but capital on land will be post tax

Tax relief on the interest only ,

Mooooo · 03-12-2019 11:49am

1373 wrote: »

Tax relief on the interest only ,

That's for land loans, if it's based in equipment/ stock it's pre tax

Bass Reeves · 03-12-2019 4:22pm

Mooooo wrote: »

That's for land loans, if it's based in equipment/ stock it's pre tax

Having said all that if there loans are historical the a lot of the tax relief may already be used up

Landmark ruling

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