August, as expected, was the busiest month for farmers as the harvest season was in full swing. On the same note – not many farmers needed or even had time for a loan application, therefore August was a slower month in terms of the amount financed.
Investors followed with financing exciting agricultural projects and over August invested 734K EUR into agricultural loans on HeavyFinance. The capital was spread around 34 loans.
In total, 25.9M EUR were issued to the farmers till the end of August 2022. To date, 6.2M EUR principal is already repaid to investors together with 1.86M EUR in interest.
Currently, 78% of loans are being paid on time or are already repaid. The overdue principal of more than 90 days is 1.87M EUR – a healthy level of 7.2% of the issued amount.
It is worth mentioning that ratings B+ and C+ were introduced at the beginning of 2022, therefore, there are fewer defaults in this rating category.
The graph below shows the loan originations, principal repayments and interest payments for each quarter. Let’s take Q3 2020 as an example. Over this period, 451 thousand EUR of loans were funded, of which 428 thousand EUR have already been repaid together with 51 thousand EUR of interest. 21 thousand EUR is late for less than 90 days and 12 thousand EUR is currently more than 90 days overdue. (If at least 1 instalment is overdue, we treat the whole principal amount as being late).
During the whole period (since April 2021), 1.95M EUR of loans were issued in Bulgaria and 68% of these are being paid on time or have been repaid already earning investors 129K EUR of interest. Only 69K EUR is overdue for more than 90 days.
Regarding late loans, in August we had 6 customers who were more than 60 days late on their payments. The reasons for the delay were discussed and evaluated with four customers.
For the BG0000359, considering the client’s planned future income calendar, it was agreed to restructure the loan by changing the payment schedule, extending the loan repayment period and increasing the loan interest for investors by 2%. It was agreed to restructure the existing two loan agreements in exchange for an additional real estate pledge.
For the BG0000650 we had a conversation and a personal visit on site. He needed a few days to sort the potato crops and sell them to the hypermarkets. He managed to keep the promise and cover 2 of his late payments in full and partially cover the third one with the delayed interest.
BG0000230 faced insolvency problems but managed to cover part of the late payments, though cannot fulfil the obligations in full at the moment. Considering that the client plans to receive state benefits at the end of the year, it was agreed to wait for him as he expects to get enough money from his partner who buys his milk at the end of the month.
The fourth customer with 2 loans – BG0000384 and BG0000413 – wants to sell his tractor which he does not need and wants to cover all outstanding amounts and obligations under his loan contracts. He sent us the contract with the tractor buyer, who expects bank financing. However, according to our procedure, we have sent a notification letter asking him to pay his debts as soon as possible.
Notarized letters were sent to the remaining 2 overdue customers warning them about the contract cancellation if the late payments are not covered.
During the whole period (since May 2021) 1.29M EUR of loans were issued in Latvia. 89% of loans issued are being paid on time or have been repaid already with 79K EUR of interest. There are no loans overdue for more than 90 days.
There are 4 loans overdue for more than 30 days. All farmers promised to pay after the harvest.
During the whole period (since June 2020), 19.3M EUR of loans were issued in Lithuania, 78.8% of loans issued are being paid on time or have been repaid already with 1.52M EUR of interest. 1.67M EUR is overdue for more than 90 days.
The last month of summer was special as the majority of grain growers successfully harvested and delivered their harvest to purchase points. Although not all of them did so, as the price of the crops during the harvest is slightly lower than during the off-season, so some farmers are storing the crops waiting for a better price. During this month, the HeavyFinance team continued actively communicating not only with borrowers but also with grain buyers, who helped to solve the overdue debts of existing customers. It should be noted that the vast majority of farmers will be paid for the delivered production from the beginning of September until the end of October. During this month, one loan was restructured. With the help of the bailiff, a decision was made to sell the property pledged for the defaulted loan LT0000241 at the market value, therefore the investors got back not only the principal but also interest and late fees.
In the judicial process, everything is going according to plan, but August is a month of stagnation, since most of the institutions are on vacation, so we are hoping for a more active period since the summer is over. As was mentioned in July, we actively communicated with farmers who want to stop forced debt collection and on that basis hope that after receiving the money for the harvest they will be able to settle with the investors in full and cover at least this year’s obligations according to the schedules with all accrued arrears.
We have to inform you that UAB Geri grūdai submitted a request for debt restructuring, i.e. enter into a settlement agreement suspending collection for a period of four years, on the condition that during this period the debtor will make partial payments every six months, otherwise he will apply to the court for the initiation of a restructuring case. A response to the request with conditions for the preparation of the agreement has been submitted.
In August, one decision was made to terminate the loan agreement and start legal recovery. One writ of execution has been submitted to the bailiff for forced debt collection and one writ of execution has been received, which will soon be handed over to the bailiff.
We believe that the overall results are good, as the intensive communication with the debtors has resulted in a positive result regarding the payment of overdue debts.
During the whole period (since December 2021) 2.2M EUR of loans were issued in Poland. 68% of loans issued are being paid on time or have been repaid already with 77.5K EUR interest. 61K EUR is overdue for more than 90 days.
There are 11 loans over 30 days late. 3 clients entered the restructuring process with court oversight. 1 loan is submitted to the court – the entire loan amount is expected to be recovered. Some farmers warned us in advance that they will be able to cover outstanding instalments after they receive money from the harvest. In September and October, a significant amount of late payments should be paid and we expect the remaining instalments to be paid on time.
PL0000830 – We’re in contact with the client. He’s currently waiting for the payment after the harvest and will finally be able to pay the instalment as well as cover the remaining part of his previous loan PL0000494 (it should be fully repaid).
PL0000416 – A small payment has been made, but the HF team is in contact with a borrower who promised to cover any late instalments after the harvest is over.
PL0000501 – The documents have been submitted to the court. As no response has been received in 3 weeks HF lawyers decided to send an additional application asking to accelerate the process.
PL0000521 – Legal procedures are going according to official terms which are not in HeavyFinance’s power to speed up. Hopefully, as the harvest is almost over a farm evaluation will be done and the proposition drafted.
PL0000417 – Entered a restructuring process with a restructuring advisor. HeavyFinance is waiting for the advisor’s proposal and if all parties (including other lenders) agree a new payment schedule will be presented and accepted in court.
PL0000646 – Entered a restructuring process with a restructuring advisor. HeavyFinance is waiting for the advisor’s proposal and if all parties (including other lenders) agree a new payment schedule will be presented and accepted in court.
PL0000437 – Despite the best effort of our operations team we weren’t able to contact the borrower since July (neither by phone, email nor SMS). A paper notice has been sent with a reminder of late payment.
Registered letters were sent to the remaining Borrowers warning them about the contract cancellation if the late payments are not covered according to the late loans procedure.
During the whole period (since December 2021) 1.15M EUR of loans were issued in Portugal. 82% of loans issued are being paid on time or have been repaid already with 61K EUR interest. 64K EUR is overdue for more than 90 days.
In August, we contacted 6 Portuguese borrowers that saw themselves forced to delay payments due to the amount of work in the fields and the steep increase in costs during the course of 2022.
Projects PT0000280 and PT0000755 committed to pay until the 8th of September, while PT0000645, PT0000664, and PT0000663 promised to pay until the 15th and the 16th of September. The owner of the loan PT0000311 commits to pay 2 more instalments before the 10th of September, otherwise, we will start court procedures following the termination letter sent previously.
We are waiting for the acceptance of 3 loan restructurings, PT0000217, PT0000448, and PT0000540.
From the 6 contracts that were terminated and followed court procedures, PT0000457 and PT0000512 contacted us to avoid further judicial procedures and are currently negotiating terms to reach a payment agreement.
Judiciary summer break ended on 31st August, meaning that the court procedures for the loans PT0000310, PT0000449, PT0000469, and PT0000209 will proceed from the 1st of September. Additionally, PT0000581 was terminated during this period and will also start court procedures.
Having all the economic and geopolitical situation turbulence in mind with increased costs for farmers – the majority of agricultural entrepreneurs expect solid revenue from the harvest in Autumn as well as EU support early next year.