The Other Side of Leverage

[bobofthenorth]

According to the experts on twitter, this is who supposedly holds the 950 million loan that was called:

9-bank syndicate led by BNS, including all big-five Canadian banks + FCC + EDC + Conexus Credit Union

If this is true, then not hard to see a scenario where all the major Canadian agricultural lenders lose their appetite for a risk of any kind.

In your dreams. It won't make a damn bit of difference. The big 6 alone made over $60 billion NET in 2025. Add in FCC and all the Soviet Unions and the number is frightening. We have the most concentrated banking system in the world and they literally print money every day of the week.

The lawyers will feast on Monette's remains. The banks have already taken provisions for loan losses against whatever they may eventually eat. And life will go on exactly as before. You and I will pay for it in fees.

[makar]

In your dreams. It won't make a damn bit of difference. The big 6 alone made over $60 billion NET in 2025. Add in FCC and all the Soviet Unions and the number is frightening. We have the most concentrated banking system in the world and they literally print money every day of the week.

The lawyers will feast on Monette's remains. The banks have already taken provisions for loan losses against whatever they may eventually eat. And life will go on exactly as before. You and I will pay for it in fees.

And 20 years ago bank wouldn't borrow me 3000 dollars to buy a grain truck for 4500 with 1/3 down. Reasoning i dont owe money on anything newer than 10 years old with a engine. They never seen a dime from me since. Do they care? No.

[LEP]

LEP, as someone with banking experience.
When a business is growing exponentially as this one was, would a banker be able to get a clear picture of profit or loss before it's too late?

If this year I'm selling crop from 5,000 acres, but buying inputs and equipment and labor for 10,000 acres. Then next year I'm selling crop from 10,000 acres but my expenses are for 20,000 etc all the way up to 400,000
I would never show a profit due to the expansion. But like any exponential growth, once it comes to a screeching halt, it would be impossible to continue to hide operating losses in the expansion expenses.

Or am I being naive?

You are right. Continual expansion makes it hard to benchmark against similar operations. It takes atleast 3 average years to level out.

I think Monette's problem was continual losses told the tale. Tough to come up with a good story for the banker year after year.

But despite hitting a wall, he did what few are able to.

[shtferbrains]

Warren Buffett also said debt was like a knife taped to your steering wheel.

I'm not a doomer nor a prognosticator, but it's been a little deja vu all over again for a little while now.

Andjelic may have been right with his warnings this winter.

Andjelic has probably sat across the table from many that got caught in a cash squeeze after the banker has told them policy has changed and they are out of credit.
Monette won't be the only one getting a "margin call".
Don't be collateral damage.

Some of Andjelic's Key Warnings and Current Observations summarized by AI

• The "Capital Squeeze": During a January 7, 2026, webinar, Andjelic warned of a looming finance squeeze where banks would tighten lending due to non-performing loans in commercial real estate and other asset classes. Recent reports confirm that lending to the agricultural space is indeed "tightening up" as interest rates spike on loan renewals.
• Commercial Real Estate "Bloodbath": He predicted that a collapse in commercial real estate would spill over into the broader economy, potentially triggering a global recession. While he remains bullish on the long-term future of agriculture, he stressed the need for producers to be proactive with their lenders to survive this "soft patch"
• Farmland Market Risk: Andjelic has been vocal about the risks of aggressive expansion at current price levels, echoing analyst concerns that land prices could be hitting "areas of resistance"
• His specific 3-prong approach for negotiating with lenders includes:
• Start with your accountant, not your banker: Before meeting your lender, have your accountant review your "numbers story" from a banker’s perspective. This helps you identify and address financial "red flags" (such as weak liquidity or high leverage) before the bank sees them.
• Meet your banker early and speak "banker": Be proactive rather than waiting for a renewal. Present a clear plan using the metrics lenders care about, such as debt coverage, liquidity, and balance sheet strength. The goal is to "give them the tools to go to bat for you" when they have to justify your loan to their internal risk committees.
• Prioritize survivability over growth: In a tightening market, successful operators focus on operational efficiency and cash flow rather than aggressive expansion. He warns that "your balance sheet won't save you if your cash flow breaks" and suggests that being a "strong operator" means managing debt conservatively and updating collateral values early

[furrowtickler]

Interesting advice coming from an investor who demands high cash rents .
He not wrong but is also part of the problem in Ag

[AlbertaFarmer5]

. You and I will pay for it in fees.

My concern is that after this learning experience, you and I will pay for it with higher lending costs and stricter requirements, and a much shorter leash.

[wheatking16]

Andjelic has probably sat across the table from many that got caught in a cash squeeze after the banker has told them policy has changed and they are out of credit.
Monette won't be the only one getting a "margin call".
Don't be collateral damage.

Some of Andjelic's Key Warnings and Current Observations summarized by AI

• The "Capital Squeeze": During a January 7, 2026, webinar, Andjelic warned of a looming finance squeeze where banks would tighten lending due to non-performing loans in commercial real estate and other asset classes. Recent reports confirm that lending to the agricultural space is indeed "tightening up" as interest rates spike on loan renewals.
• Commercial Real Estate "Bloodbath": He predicted that a collapse in commercial real estate would spill over into the broader economy, potentially triggering a global recession. While he remains bullish on the long-term future of agriculture, he stressed the need for producers to be proactive with their lenders to survive this "soft patch"
• Farmland Market Risk: Andjelic has been vocal about the risks of aggressive expansion at current price levels, echoing analyst concerns that land prices could be hitting "areas of resistance"
• His specific 3-prong approach for negotiating with lenders includes:
• Start with your accountant, not your banker: Before meeting your lender, have your accountant review your "numbers story" from a banker’s perspective. This helps you identify and address financial "red flags" (such as weak liquidity or high leverage) before the bank sees them.
• Meet your banker early and speak "banker": Be proactive rather than waiting for a renewal. Present a clear plan using the metrics lenders care about, such as debt coverage, liquidity, and balance sheet strength. The goal is to "give them the tools to go to bat for you" when they have to justify your loan to their internal risk committees.
• Prioritize survivability over growth: In a tightening market, successful operators focus on operational efficiency and cash flow rather than aggressive expansion. He warns that "your balance sheet won't save you if your cash flow breaks" and suggests that being a "strong operator" means managing debt conservatively and updating collateral values early

While Robert and I have different strengths and don't agree on everything, we both have a strong desire to share what we are anticipating to help prevent a negative experience.

[blackpowder]

There's a business model that avoids wind-up.
And one that is a smash and grab.

Andjelic isn't part of any problem.

[wheatking16]

There's a business model that avoids wind-up.
And one that is a smash and grab.

Andjelic isn't part of any problem.

I agree.

[LEP]

Definitely agree with creating loan capacity before you need it.

After good years and when your financials warrant more lending, put in place some breathing room. I use FCC advancer.

Don't draw it down until an opportunity presents itself.

In the meantime educate yourself on what an opportunity looks like.

Likely isn't shiny paint or crazy expensive land.