A troubled shipment of cattle to China has landed a Hamilton-based livestock exporter in financial strife with creditors, including up to 50 farmers reported to be collectively owed millions of dollars.
Te Puke-based Armer Farms (NI) Ltd has made an application to the High Court in Hamilton to put Genetic Development Exports (NZ) Limited Partnership (GDExLP) into liquidation. The hearing has been set for September 5.
At least 47 farmers have been chasing payment for cattle they contracted to a shipment that left from New Plymouth in May.
GDExLP managing director Dave Hayman said his company took a “massive financial hit” from the livestock ship MV Al Kuwait failing to come to New Zealand in early May to collect the 12,000 head of cattle that were waiting on two pre-export isolation farms.
Total direct costs and losses added up to well over $5 million, Hayman said.
This did not count loss of value for farmers or reputational damage and future loss of earnings for GDExLP.
“Events unfortunately played out that for the cattle that did get exported on the smaller ship, the letter of credit was paid substantially short due to the vessel being light-loaded by 300 head due to delays and a ruling by the Ministry for Primary Industries on new feed requirements,” he said.
“Some chunky banking fees were deducted, which are in dispute, with the total deficit on the letter of credit payout being about $1m, plus all those extra costs as detailed.”
The lack of this income and the excessive costs has meant GDExLP has not had the cash to finish paying for all cattle, he said
The farmers have been made aware of GDExLP’s financial plight, but they maintain that they are covered for payment under a “letter of credit” advised by the exporter.
Steve Kitchener, director of Waikato-based Maui Farms, had an experience typical of many farmers who contacted Farmers Weekly.
His cattle left his property on March 28. “Payment never came and I was promised payment continuously,” Kitchener said.
Loading day arrived and he had not been paid.
“Then the export company threatened that if we didn’t agree for the cattle to board the ship on the promise of payment in two weeks – and [it] provided a letter of credit as proof – that they would go into liquidation and the cattle would be seized anyway leaving us no choice but to comply,” he said.
The ship sailed on May 27 and still there’s been no payment.
“I have been getting one excuse after another and am absolutely desperate for the funds,” he said.
“I’ve tried legal action, debt collection agencies and even turned up unannounced at their head office.
“I’m at my wits’ end and I know there are many other farmers out there who are owed large amounts of money also.”
Kitchener said he is owed $47,000.
Other farmers have reported similar non-payment for amounts up to the $50,000 threshold destined to have been paid direct by GDExLP.
The “letter of credit” applied to an arrangement brokered by Australian livestock exporter Purcell Exports. More than 85% of the cattle were paid for through the larger stock agent companies who had been issued irrevocable letters of assignment from the letter of credit.
“When complications set in, we were asked to facilitate a financial solution so the shipment could go ahead,” Purcell Exports managing director Patrick Purcell said.
“We found a solution with an overseas bank (Bank of Ireland).
“Our instruction was to pay 11 or 12 suppliers, the bigger contracts with agents, and it was for about $8 million, and the letter of credit was for these suppliers only.
“We were instructed to issue payment to those suppliers and they got paid.”
Purcell said his company was not involved with loading the ship but he understands the “ship went light”, a few hundred cattle short, and that’s why there are outstanding payments.
“We did not pay GDExLP, it was not in our contract,” he said.
“I feel heartbroken for the suppliers and farmers who dealt directly with GDExLP and never got paid.”
Armer Farms director Colin Armer said the money chase goes further back in their case.
“Armer Farms issued a statutory demand that expired on May 2, so they [GDExLP] have technically been trading insolvent since then.”
Armer did not disclose the amount owing to his company but said “it is significantly more” than $50,000.
Hayman said these irrevocable assignments had first priority on the funds available and they cannot be changed, so there was no possibility for payments to be adjusted in any way.
He said while it is understandable that Armer Farming would like to get to the front of the queue for payment, the liquidation application will not benefit them, and it puts at risk the settlement process for other farmers who are waiting for payment.
To get any useful settlement for farmers and other creditors relies on GDExLP being able to trade through to maintain the support and goodwill of the Chinese partner to help with settlements, file a claim against the shipping company for failure to perform and to generate some future income where possible.
“It has been tough to get traction on these actions but recently there has been progress, hence at this stage we do not intend to allow the business to go into liquidation to protect the best interests of all creditors and we have to ask for patience from the farmers, some of whom we know desperately need the funds,” he said.
So will farmers be paid for their cattle?
“We still believe this can happen and are working hard to do so,” he said.
“As soon as we have sufficient clarity and commitment that we can indicate a payment plan, we will inform the farmers.
“In the interim the major extra costs depleted our capacity to deal with any shortfall, all in all a very frustrating sequence of events that was difficult to predict.
“We are sorry for the drama and stress for farmers and other suppliers that have been caught up in it,” he said. Farmers Weekly has fielded reports from other industry stakeholders, including trucking companies and stock firms with significant outstanding payments.
