The fall-out from the appointment of a receiver to the TLT livestock exporting company is set to continue for some time.
Of immediate concern is what funds will be available to the marts and individual farmers who dealt with TLT. Clearly, this will be a time of great stress to mart managers, committees and farmers. For the individual farmer, the exposure is hugely traumatic and ICSA is happy to help anyone in difficulty.
However, the early indications are that the bulk of the debt is owed to marts.
The hope is marts that have been run profitably for a number of years should have the financial resources to survive this. Assuming that they have been diligent in managing their credit levels and in pursuing monies owed on a weekly basis.
The question that exercises most thought is what will be the impact on live exports and the cattle trade in general? There is reason to be hopeful that the demand for livestock around Europe and North Africa will remain constant and the slack will be taken up by other Irish exporters.
However, it would be naive to think that this will happen easily. For one thing, the directors of TLT, the Garavelli brothers, had built up a base of customers over many years and there is no obvious reason to think that these relationships can be readily taken over by another Irish exporter.
Moreover, the harsh fact is that the credit terms required by continental buyers aren’t going to soften just because of the TLT experience. The credit level of some €3m that was available to TLT from HSBC bank is now off the table and marts apparently have an exposure that could run as high as €3m also. That’s €6m which will have to be found elsewhere.
Marts are all likely to take a much more cautious line for the foreseeable future. The consequence is that either we develop an export trade based on payment up front or we find a better way of financing the sector.
Farmers will be concerned also that any reduction in live exports will be a silver lining for the meat factories.
There has also been positive reaction from farmers to new live cattle export markets to Libya and Tunisia, some of which were transported by TLT. All of this ensures that cattle are scarcer for the meat industry here and scarcity equals firmer prices.
TLT were also involved in live sheep exports and again, the concern is that fewer live exports mean lower factory prices for sheep farmers.
In reality it will really be this time next year before an accurate assessment can be made. Fortunately, Irish beef finishers have been strong customers for weanlings in recent weeks. However, a key for any mart and for the wider sector is to ensure that there is a strong trade over the full 12 months.
The debacle again raises the question of the availability of credit to the livestock business. TLT discovered that the banking sector seems to be intent on continuing to reduce its exposure to the sector.
There is certainly an argument that the best way to ensure a maximum return to all creditors would have involved an examinership or a more gradual wind-down of the credit facilities rather than the receivership which has wiped out TLT but without any great hope that all monies owed can be recouped.
© Irish Examiner Ltd. All rights reserved