Glanbia extends MilkFlex Loan Fund until December 2017

Glanbia Co-operative Society, the Ireland Strategic Investment Fund, Rabobank and Finance Ireland have announced the extension of the ‘Glanbia MilkFlex Fund’ until the end of December 2017.

The fund offers “flexible, competitively-priced” loans to Glanbia milk suppliers, with loan repayments that vary according to seasonality and movements in milk price.

The purpose of the fund is to provide Glanbia milk suppliers in the Republic of Ireland with an “innovative funding product to support investment in on-farm productive assets” (including livestock, milking platform infrastructure and land improvement).

Since its arrival on the market in May 2016, the MilkFlex fund has received loan applications totalling €43 million, and has provided loans with an average value of €100,000.

A key feature of this loan product is that it has inbuilt ‘flex triggers’ that adjust the repayment terms in line with movements in Glanbia Ingredients Ireland’s (GII) manufacturing milk price and seasonality, thereby providing farmers with “cash flow relief when most needed”.

Rabobank, the Ireland Strategic Investment Fund, Finance Ireland and Glanbia Co-Operative Society are co-investors in the fund, while Finance Ireland originate the loans and manage all aspects of the fund.

The interest rate charged on the loans is a variable rate of 3.75% above the monthly Euribor cost of funds (with a Euribor floor of zero).

Henry Corbally, Glanbia Co-op chairman said that in November, almost 90% of GII milk suppliers completed a very detailed milk planning census, with a large number expressing interest in applying for a MilkFlex Loan to support investments planned for 2017.

“We are very appreciative of the support of our partners – the Ireland Strategic Investment Fund, Rabobank and Finance Ireland – in agreeing to extend the Glanbia MilkFlex Fund until the end of 2017.”

The MilkFlex loans have a standard term of eight years, but may be extended by up to a maximum of a further two years when volatility triggers are enacted.

The key features of the loan product are:
  • A six-month reduction by 50% in loan repayments, when the GII manufacturing milk price falls below 28c/L (including VAT) for three consecutive months;
  • A moratorium on all loan repayments for six months, when the GII manufacturing milk price falls to or below 26c/L for three consecutive months or when the outbreak of a notifiable disease reduces milk output materially on the previous year and;
  • An increase in loan repayments, when the GII manufacturing price goes above 34c/L for three consecutive months.

From a milk supplier perspective, there are a number of key features of the MilkFlex Fund including; loan repayments are automatically deducted from the supplier’s milk receipts by GII; loans are available for amounts of between €25,000 and €300,000 and; loans are unsecured. However, repayments are made as a priority deduction from milk payments.

Lending decisions are based on the merit of a farmer’s cashflow as opposed to the asset value of their farm, subject to meeting eligibility and underwriting criteria, according to Glanbia.

There is also an amount set aside within the fund for new entrants to dairy farming.

Finance Ireland will continue to manage the origination of loans from the fund and will require a clear business case in order to justify the lending decision. Each applicant must meet eligibility and underwriting criteria.