In his 27-year police career Dennis Wood encountered more than a few delinquents.
Ten years after leaving the police as a fraud squad detective inspector and now specialising in rural insolvency, he is still dealing with them.
This time they are farmers and growers who fail to heed warning signs or listen to financial advisers or bankers.
"Their accounting finesse is often zilch and they don't know the meaning of a forecast cash flow," Wood says. "Some seem to have an unwitting desire to be dealt with by a commercial undertaker. Others will go to great lengths to hide toys or valuable assets when they are placed in receivership."
When that happens, he employs his investigative skills.
The "toys" - typically a bach, boat or car, or farm machinery - have been bought using money borrowed to repay debt. In one case, Wood used a helicopter to find a hidden excavator.
In another case, on the second day after being put into receivership a farmer whisked away a mob of valuable milking cows, trucking them from Coromandel to Palmerston North.
"We tracked them down," Wood says. "It was basic detective work, banging on the right doors, finding a couple of witnesses and tracing the truck."
Wood is also a dairy farmer, milking 100 cows on the small Karaka farm where he grew up, and says he has an empathy with farmers in trouble.
Rather than always having to clean up after financial breakdowns, he wants to help farmers before it is too late.
He says many accountants and consultants don't have much experience of formal insolvencies and how to avoid them.
"This is my area. I'm who you go to when you've been arguing with your shareholders for two or three years and come up against brick walls."
He finds that, typically, there are no formal agreements in place.
"One side says, 'You're not reporting to us properly, we don't know what's happening to the money, we don't have joint signing authority'; it goes on and on."
Mediation helps to settle this problem.
"That's a policeman's job. It's knowing how to talk to people, how to approach them, how to get a hearing, how to get them around a table, nut it out, understand what the options are, what's easy and what's hard, what could happen, the financial implications."
Other problems could be caused by a marriage breakup, non- payment of tax, fraud and theft.
"Often we take a global overview to assess all the problems rather than just dealing with one issue. The aim is to give enough breathing space to allow the business to avoid mortgagee sale or receivership and get back on its feet."
Options may include debt- management plans, reviewing and restructuring cash flow, refinancing, introducing equity partners, formal creditor compromises, arranging payment plans or formal proposals for debt repayment to Inland Revenue.
"Biting the bullet" through sales of shares, other assets and "toys" may also be needed.
Wood says the creditor compromise is not used often enough. It forces creditors to compromise on the amount of debt owed. This is usually used in combination with other options, including a partial asset sell-down and negotiations with Inland Revenue.
PUTTING the business up for voluntary administration is another under-utilised option that ensures a creditor cannot put a business into liquidation.
In some cases, farmers have already been tapped on the shoulder by their accountant to wind back spending or have been warned by bankers to revise their business strategy.
The main banks have teams to deal with stressed accounts, he says.
"When the lender moves your account into one of these divisions, it is time for you to start listening - big time."
Much of his business comes from farmers, investors and lenders who see problems mounting and realise they urgently need to get help.
For some, their experience can be a warning for others to heed.
He tells of a farmer who leased out a herd of cows but then found half of them were missing. The police were not interested and his only recourse was an expensive civil case.
But he could have pre-empted trouble by taking out a security interest over the cows - a legally binding statement that he owns the cows.
Wood points to similar cases in the recent past - a machinery company that sold a tractor to a farmer on deposit but when the farmer went into receivership lost the tractor; and a farmer who grew a crop on leased land and lost ownership of the crop to the landowner's principal creditor.
In each case, the asset could have been saved if the owner had taken out a security interest.
He estimates there have been 50 receiverships and liquidations since the beginning of last year, not including a huge number of rural businesses that have voluntarily been wound up, liquidated or been subjected to mortgagee sales.
He expects this trend to keep pace with rising rural bank debt, currently about $49 billion.
His company, Act Three Rural Insolvency and Investigations, based in Auckland, does not move to the receivership stage lightly, he says.
"In most cases there's been two or three years' lead-up, where the banks have moved the account to a manager who works to try to turn it around.
"Often, if you look behind the receivership you will find six to eight defaults, breaches of the bank covenants under their lending documentation."
Yet when the farmer is put in receivership he "screams to high heaven he hasn't been given a fair chop of the cherry", Wood says.
"But I see the other side, that he has been given a lot of time to put his house in order and he just hasn't listened.
"Hand on heart, I can't think of any cases where the bank has not been more than reasonable."
Failing farm businesses have many warning signs, says Dennis Wood.
- Liquidity problems
- Owners who won't listen to advice
- Constant disputes with debtors and creditors
- Poor management decisions
- Missing funds, through fraud or theft
- Local body compliance difficulty and prosecutions
- Animal welfare problems
- Not resident on the property
- Excessive capital expenditure
- Governance disputes
- Excessive personal drawings
- Spending on "toys"
- Not paying tax
- Disgruntled creditors taking wind-up action
- The Dominion Post
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