SALEM, Ohio – A Dutch banking cooperative plans to purchase Farm Credit Services of America, a $7.8 billion-asset agricultural lender servicing Iowa, Nebraska, South Dakota and Wyoming.
Farmers in other states, however, will not be affected, said Philip Kimmel, senior vice president of business development with Farm Credit Services of Mid-America, the Farm Credit agency that serves Ohio.
Farm Credit System is the overarching name of various Farm Credit entities serving farmers in every county across the United States, Kimmel said.
This acquisition marks the first time a Farm Credit agency has been bought, he said.
An end, beginning. Following the purchase, Farm Credit Services of America will operate as the renamed, wholly owned subsidiary of Rabobank, the Dutch company with about 375 member banks and several subsidiaries.
As part of the agreement, Farm Credit Services of America will end its status with the overall Farm Credit System.
Stockholders will first have to approve this move, Kimmel said.
Exiting fee. To protect Farm Credit entities from taking their capital and leaving the system, laws require an exiting agency to pay a fee. In this case, Farm Credit Services of America will have to pay more than $800 million, which will be placed in the system’s insurance fund.
All Farm Credit entities must put money into this fund. But with Farm Credit Services of America’s exit fee, the other entities likely will not have to contribute money to the fund for an unspecified amount of time, Kimmel said.
Farm Credit entities are currently depositing a tenth of a percent of their outstanding loans, however, this amount fluctuates, Kimmel said.
The insurance fund must maintain an amount equal to 2 percent of Farm Credit System’s outstanding loans.
Looking ahead. If Farm Credit Services of America exits the system, the administration will re-charter those states so there will still be a Farm Credit entity serving those farmers, Kimmel said.
Rabobank and Farm Credit Services of America expect the transaction to be completed by early 2005.
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