Reports have emerged over the past few days that Ulster Bank is embarking on a loan portfolio sale which allegedly includes a number of non-performing farmers' loans.
According to recent reports, the bank has contacted a large number of farmers and small businesses advising them they should either repay their loans in full, refinance their debt or risk having their loans sold to unidentified third parties.
One of the main concerns highlighted by the farming industry representative groups is the criteria by which a loan falls into the "non-performing" category. If your loan is interest-only, you have missed repayments or have not maintained engagement with the bank your loan could fall within the category.
If you have received a letter or communication from the bank, the first piece of advice is to actively engage with your relationship manager. There is often a very tight window of opportunity to restructure your loan or come to some sort of deal with the bank.
A number of key points should be borne in mind if you receive such communication from the bank:
- Knowledge – can the bank sell your loans?
Sometimes the bank is required to consult the borrower in advance of any transfer or can only transfer to certain types of purchaser.
- Security – is consent required to transfer from borrower or guarantor?
Borrowers should check the terms of all security documents and associated contracts, for example, guarantees to see whether these can be sold on with the loan without the borrower’s consent or if there are any other restrictions regarding transfer.
- Confirmed Agreements
Make sure that any ongoing disputes or agreements reached with the bank about amendments to terms on your facility, or waivers of the bank’s rights are recorded in writing. Remind the bank of all the points you would like a potential loan purchaser to be made aware of.
- Confidential Information
What confidential information about your business has the bank disclosed to potential purchasers with the sale memorandum or in the data room? The bank can not disclose confidential information it holds about your business and/or personal financial circumstances unless the loan agreement provides for this or you have subsequently agreed to it. Does the loan agreement allow the bank to disclose that information?
- Be Alert
Take legal advice on any proposed changes to facility terms, even if they appear straightforward or if you think you know what they are intending to do. There may be implications or consequences, not apparent to non-lawyers, which could be important in the context of your rights in the event the bank decides to sell your loan.
This publication is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Leman Solicitors for any action taken or not taken in reliance on the information set out in this publication. Professional or legal advice should be obtained before taking or refraining from any action as a result of the contents of this publication. Any and all information is subject to change.
“Farmers are shocked at the announcement and the IFA has demanded an urgent meeting with management. The IFA has voiced farmers’ concerns that the move will force them to deal with unknown third party funds which have little or no knowledge or understanding of their business and the farming sector,” said IFA farm business chair Tom Doyle.