By: David Montgomerie | Wednesday, October 10, 2012 8:48 AM

Some people say that if you owe the bank $50,000 it is your problem and if you owe them $50 million it is their problem.

Although it is often said mainly in jest, it is truer than you might think.

Someone who has borrowed $50,000 is likely to have done so in their own name and have a source of income which is not dependent on the secured assets. Those who borrow millions often do so through companies and are reliant on the enterprise’s success in order to service and repay the debt.

Banks don’t like losing customers. They don’t like losing money either. However, when $50 million is at stake the balance swings in favour of the money.

A number of farmers have found that over the years, Allan Crafar being one example. Robert McVitty is another.

McVitty is the director of McVitty Properties Limited (in receivership and liquidation) and Patoka Dairies Limited (in receivership). McVitty has been making headlines since 2008, after a MAF prosecution. An inspector had spotted a cow being transported in a trailer with its head hanging over the side, close to oncoming vehicles. The inspector followed it to a farm. On arrival Mr Mcvitty appeared with a shotgun and killed the animal. This incident resulted in $2262 in fines and costs.

Since then both McVitty Properties and Patoka Dairies have been placed in liquidation by the Bank of New Zealand. According to the receiver’s first reports, the companies collectively owed the BNZ over $80 million.

Several farms owned by McVitty Properties in Norsewood and Manawatu have since been sold by the receivers. The receivers for McVitty Properties noted in their most recent report that the sale prices were, on average, above recent market valuations. The receivers believed that they had been able to improve the performance of the farms, resulting in sale prices above market valuation.

The receivers for Patoka Dairies have continued to manage the farms. t has not been determined when these farms will be sold. The latest report by the receivers states that, as a result of development activity on the farms, annual milk production has increased by 58 per cent.

In this case it looks as though the sale of the company’s assets may provide a reasonable return to the creditors.

McVitty Properties has recently been placed in liquidation by resolution of the shareholders. The liquidators have reported that they have been unable to get Mr McVitty to complete the required questionnaire. This seems unusual as the shareholders are Mr McVitty and his wife.

Of course, looking back to the opening sentence this isn’t unusual. When it comes to recovering large debts it really is the bank’s problem. Cooperation from the borrower is unlikely to be forthcoming. Recovery is likely to be difficult. Even if productivity can be increased by over 50 per cent.