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The Supreme Court has ruled in favour of an argument put forward by a Co Wexford farmer, seeking to pay off debt owed to a vulture fund that the court’s assessment of whether or not he is insolvent should be based on cashflow, rather than assets.
The move has been welcomed by farm representatives as potentially opening up the door to personal insolvency agreements for more farmers who find themselves in asset rich, cash poor debt repayment difficulties.
The Supreme Court’s ruling concerned two loans originally taken out by Fergus O’Connor of Ballygarron, Kilmuckridge, Wexford, with Ulster Bank, but the loans were since sold to the vulture fund Promontoria (Oyster) DAC.
Mr O’Connor farms 190ac in Co Wexford and is the owner of a separate rental property. The vulture fund argued that, as the farmer’s assets exceeded the value he owed, he should be required to sell land or other farm assets to repay the debt.
Mr O’Connor claimed that selling land, livestock or other assets would jeopardise his income and not return him to solvency.
Proposed restructuring
The farmer had sought the drafting of a personal insolvency agreement and one was proposed which provided for the full repayment of all liabilities to both the vulture fund and other debt the farmer owes, including to trade creditors.
It seeks to restructure the debt due to the vulture fund over 30 years, with half of the loan warehoused for the first three years of the agreement.
Significantly, the agreement proposed would not require Mr O’Connor to dispose of any assets to meet repayments, including any of his land, livestock or farm machinery.
The case is to go back to the High Court for this proposed restructuring request to be assessed from the cashflow point of view, rather than from the point of view of the farmer’s balance sheet.
Ruling welcomed
The ruling was welcomed by the personal insolvency practitioner who drafted the agreement, Gary Digney of FPM Accountants Ltd.
Digney stated that the ruling confirmed that the personal insolvency regime is an option for farmers with land assets when dealing with receiver demands, but also that each case will be considered on a case-by-case basis and “there is no one size fits all approach”.
Irish Creamery Milk Suppliers Association (ICMSA) president Pat McCormack said many farmers have a viable business and want to sort out their debt, but are getting nowhere dealing informally with investment funds.
The IFA’s James Kehoe added that farmers in difficulty and under threat of receivership should avail of the personal insolvency route to cease the threat of [vulture] funds.
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