The cost of the AIS collapse continues to rise
While it has been the subject of much speculation since May, when news broke of the collapse of grain merchant Alexander Inglis and Son, the release last week of the administrator’s preliminary report finally gave precise figures on the extent of losses suffered by Scottish farmers. .
And, with an overall financial shortfall likely to be significantly higher than what had been shown in the directors’ balance sheet, the directors predict it could exceed Â£ 70million – making the collapse one of the most important events. most important to have hit Scottish agriculture in recent years.
The report suggests that Australia-based Macquarie Bank Ltd will likely be hit the hardest, despite being the âsecuredâ creditor, but so-called âunsecuredâ creditors also face a substantial bill.
This group (which includes growers, hauliers, other grain merchants and fertilizer companies) is expected to be worth Â£ 6.1million, the report said – but a week after its publication, administrators now believe that this debt could also be even higher – estimated at nearly Â£ 17.5million – when backordered claims are factored in.
The effect such a blow will have on the farming community as a whole will be bound to be devastating – especially since farm businesses (many of which have filed six-figure claims) are unlikely to see the color of their money again. after complaints. secured and privileged creditors have been settled.
The report released last week by Directors looking at the whole tangled issue shows a number of farm businesses facing individual losses well over Â£ 200,000 – while two dozen of the biggest farm creditors would be out of pocket to the tune of nearly 3 million pounds in total.
And while individual claims filed with directors might be lower than some of the craziest numbers floating in the rumor mill, there’s no denying the scale of the losses – and the likelihood of only getting pennies in the pound. at best – must pose an existential threat to the dozens of farm businesses across the country that have been caught in the fallout from the collapse.
Even before the possible magnitude of the losses was known, when news of the company’s trusteeship broke, it sent a huge shock wave to the arable sector and marked a further decline in competition in the area. the grain trade, which has recently fallen into less and less hands. through failures, acquisitions and mergers.
The company, which was run by former Scottish rugby star Jim Aitken, operated five grain stores, four of which were in eastern Scotland and the Borders region, had a turnover of ‘around Â£ 100million and employed 37 people through Alexander Inglis and Son. , Inglis Grain Driers Ltd and the incorporated company, Tayside Grain in Errol, Perthshire.
Administrators said the main earnings trading business suffered from weaker trade following the 2020 poor harvest and a contraction in demand resulting from the Covid pandemic.
The report also said the group had entered into forward contracts to cover grain financed or held by Bank Macquarrie – but due to fluctuations in commodity prices, it had to make payments on margin calls.
“From 2020 this would have been a significant problem with large cash outflows given the high volatility in world grain markets and the larger differences between old and new crop prices,” perhaps we read.
âIn order to meet margin calls, stocks were sold to increase liquidity. The Group had a short position in equities and was unable to replenish the shares sold due to cash constraints, resulting in levels falling over time to fund trading losses and calls. margin.
Further, the report states that the company continued to be affected by losses inherited from transactions with the bankrupt Philip Wilson Group, a situation which led to involvement in land development in Wallyford through a joint venture, which the directors said failed to achieve the expected level of performance.
But also at the heart of the problem faced by the producers in the complicated picture studied by the administrators was the fact that there appeared to be a considerable gap between the stocks of cereals claimed and those actually held by the company.
And while directors noted that the stock assessment process was still ongoing, wheat stocks of 30,000 tonnes would be 90% lower than claims received; stocks of malting barley at 50,000 tonnes 60% lower than claims; feed barley at 3000 tonnes 40% below; rapeseed at 3000 tonnes 30% below; while the oat stocks at 2000 tonnes were close to the requested figure.
Those claiming ownership of inventory in stores have been hampered by the requirement to identify individual quantities of grain in stores, with batches being mixed even when contracts required them to be separated – and this loss of identity, afterwards. being heaped up with grain from other farms has made legal proof of ownership or retention of title an almost impossible nightmare.
However, the ownership of some of the grain in the store is still disputed – by those who bought it, those who sold it, and those who simply used the facilities to store their own grain – and final ownership has to be determined. at a court hearing at the end of August.
Directors also reported that the majority of grain stores and other company-owned facilities are currently offered by buyers, although sales have yet to close, so no indication of funds being made. could not yet be given.
But the shortfalls in the amount of grain held in these stores are both staggering and puzzling. Because although the report indicates that there was an overall deficit of around 30%, this does not correspond to the figures given for individual grains. This may be my fishy calculation, but taking wheat as an example, a 90% deficit would tell me that 30,000 tonnes were found where 300,000 tonnes were expected.
So, with today (Friday the 16th) marking the last day to submit creditors’ claims to directors, anyone who hasn’t yet done so needs to really put on their skates and act urgently rather than wait for the tangle. problems be clarified. .
It’s also worth noting that anyone who made a claim before this deadline can still provide additional information to substantiate their claim after that date, either to the administrators or to the court.
But while the level of losses is still under investigation by administrators, so are the reasons for the sudden and catastrophic collapse.
While it would be unwise to publish the craziest areas of speculation currently floating on this front, at the end of the day, there is one thing that is certain.
And it is the fact that it will be those who have been innocently dragged into this whole sad affair who will likely end up paying the price for one of the biggest financial shocks to ever hit Scottish agriculture.