FARMERS and grain traders are questioning whether National Australia Bank is Australia’s most exposed rural lender.
For a number of prominent dairy, grain and fertiliser companies that have gone broke over the past four years, in almost all cases NAB was their banker.
The latest in a relatively long list of rural failures is Brenton Strauss’ Sapphire (SA) Pty Ltd, which traded as River City Grain Co in Victoria.
It collapsed in March with NAB owed $5.2 million, some of which was not secured.
Sapphire creditor Stuart Ellis questioned NAB’s due diligence on the failed grain trader, particularly its examination of Sapphire’s history of payments.
One farming family claimed it enlisted NAB earlier this year to ascertain whether Sapphire (SA) was financially secure before selling grain to it for the first time as part of a due diligence process.
The Weekly Times was told NAB contacted Sapphire (SA)’s bank and the message back to the farmers was the grain trader was financially sound.
Sapphire (SA) collapsed a couple of months later.
NAB also took a $20 million hit when South Australian dairy company Pedra Branca Dairying Pty Ltd, run by Mount Gambier’s Doman family, went into receivership early last year.
The bank was also owed $1.3 million when One World Grain Pty Ltd collapsed in October, 2012.
NAB then placed One World Grain’s parent company, Australasian Integrated Commodities Pty Ltd, and related entities Grainassist Marketing Pty Ltd and Mid West Milling Pty Ltd into receivership to recoup the debt.
NAB was owed more than $5 million, with documents showing debt repayments to date from livestock and farm sales topping $5.28 million.
The bank was owed about $900,000 when Adrian McDonald’s Eastate Commodities fell over in late 2010.
Eastate Commodities fully discharged its debt to the bank in July 2011.
NAB was Convector Grain’s main source of finance until ANZ took over just months before the company failed in mid-2013.
Some grain growers considered taking a class action against ANZ over statements made just before the collapse.
But the big rural loss by NAB centres on Adelaide fertiliser companies Interfert Australia Pty Ltd and Megafert Pty Ltd.
A Federal Court hearing in October, 2012 was told NAB was owed “somewhere north of $140 million” in late 2009, but weeks later this had been whittled back to $100 million before both Interfert and Megafert were eventually placed in receivership.
According to a submission by Laharum Bulk Handling to the Senate inquiry into the performance of the Australian Securities and Investments Commission, the $40 million payment was accumulated from prepayment by fertiliser dealers and traders.
LBH said Interfert and Megafert were unable to supply the fertiliser because the $40 million was used to pay off the bank’s debt.
“Needless to say many small businesses have been severely financially disadvantaged by these acts,” it said.
NAB said it was the largest agribusiness bank in Australia, with the greatest reach, having more than 30,000 farming and agribusiness customers.
“We don’t comment specifically on our customers, however NAB takes a very prudent and cautious approach to risk,” a bank spokeswoman said.
“We have very strict criteria and policies in place to assess whether customers can repay their debts, not just today but into the future.
“NAB is committed to supporting good quality agribusinesses and assesses all lending inquiries on a case-by-case basis.
“We encourage customers to contact us sooner rather than later if they run into difficulties, so we can work with them to assist and potentially solve issues.”Author : PETER HEMPHILL Agribusiness writer
Source : The Weekly Times