It’s time for Vultures to be met head on to keep them from the farm gate
International Vulture Funds, purchasing loans from Irish Banks, are a massive threat to many farming families. IFA President Joe Healy said recently that these “faceless funds are hell-bent on destroying families while feeding on the carcass of the family farm”. Farming families, whose loans may be acquired by the Vulture Funds, need to understand who these ruthless organisations are, how they operate and how they should be confronted.
This is not a minor danger confronting only a small number of families. The IFA estimates that 2,500 to 3,000 farm families may be in danger and that the total amount of land involved may be up to 150,000 acres.
Vulture Funds are massive organisations investing in assets all over the world. Many Vulture Funds are owned by major International banks such as Deutsche Bank, JP Morgan and Goldman Sachs. Others are owned by Hedge Funds such as Blackstone, Lone Star and Cerebus. These funds are not regulated either in their base of operations, such as New York or in Ireland.
The biggest players in the Irish distressed loans market at the moment are funds such as Deutsche Bank, Apollo, Cerebus, Loan Star, Carval and Goldman Sachs amongst others. Vulture Funds do not usually operate in the open but use little known corporate entities to avoid open scrutiny and adverse publicity. For example the Deutsche Bank/Apollo Vulture Fund uses a group of various companies called Havbell and Cerebus uses a company vehicle called Promontoria.
Cerebus, for example, have in the past bought a €1.4 billion portfolio of loans from Ulster Bank using Promontoria as a company vehicle. Promontoria in turn uses a company called Link Asset Services to deal with farmers. Martin Stapleton, Chairman of IFA farm business services, has accused Link Asset Services of acting aggressively towards farming families and refusing to engage with the IFA
Vulture Funds differ from other types of investors in that they ruthlessly seek to make massive profits from purchasing what are called “distressed assets”. The “distressed assets” that they purchase include “sovereign debt” (Government Bonds) and property loans.
Vulture Funds are able to purchase Government Bonds and property loans, of countries in financial difficulty, at very low prices. Three countries where Vulture Funds have been active are Argentina, Greece and Ireland. They then use their financial and legal muscle to force governments and property owners to pay them much higher prices.
However if your loan has been sold or transferred by a mainstream bank to a Vulture Fund you are within your rights to look fully and forensically into the circumstances of how the Vulture fund acquired your loan. You will not be fully informed how this happened unless you enquire. A vulture fund must have acquired a proper title in your loan to be able to enforce it against you.
Farm families, whose loans are taken over by Vulture Funds, need the best possible support when negotiating with Vulture Funds. There are two key elements to this support. These families need the support of the farming community to discourage forced family farm sales. The IFA strongly opposes any attempt by the Vulture Funds to force families to sell their land.
These families also need the best legal expertise available to them. Farmers need to challenge any attempt by Vulture Funds to appoint receivers to their farms.
Some property owners challenge the funds in court without legal support. The Master of the High Court, Edmund Honohan, recently spoke of his frustration watching “lay litigants” trying to defend their property without knowing legal procedures and their legal rights.
Farming families should challenge the actions of Vulture Funds and scrutinize all the legal documents particularly the original loan documentation and the documents involved in the transfer of loans to the Vulture Funds. Sometimes the methods Vulture Funds use to enforce loans are not legally available to them, for example, a Receiver attempting to sell your land or property where the banking documentation or the lending documentation with your first bank does not provide for this power specifically. Where this occurs they should always be challenged.
Edmund Honohan also said that Judges seem to assume that financial organisations coming before the courts have their documentation in order but that this is not always correct. He gave as an example of a situation where a bank was seeking a possession order for ten acres where the mortgage deed only covered 3 acres.
Scrutinizing all this complex legal documentation is best done by practitioners with experience in this area. The Achilles’ heel of the Vulture Funds is their need to act quickly. They are not long -term investors.
Many families will have to confront these Vulture Funds and fight for their survival as farmers over the next few years. Their best hope is the combination of support from the farming community to prevent the sale of the family farm and legal expertise both to challenge the Vulture Funds and provide psychological support to reduce the stress that Vulture Funds use to break their resolve.
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Article by Donnacha Anhold, Principal and Head of Banking Law at Carter Anhold & Co