Administrators of failed forestry company Gunns are advertising for a business to take on the plantations as a ‘responsible entity’. Ads were placed in the financial press for a company to take over the routine administration of Gunns’ investments. Source: ABC Rural
Launceston-based chartered accountant, Bob Ruddick has been involved in the Tasmanian timber industry for over 30 years, is a close observer of the current forestry inter-governmental agreement process, and the implications of Gunns’ demise for farmers and the timber industry.
Ruddick has said that farmers need to get a good idea of the size and scope of the problem.
“There are two options,” he said. “One is for the lease agreements to expire after 30th November. However, farmers’ claim to the title of the trees in other MIS collapses is still uncertain.
“The other option is for a responsible entity to be found that will take on all the obligations of Gunns and conduct business as usual.
“The administrators have extended the rent free period out now to the 30th November. The administrators are seeking to find a replacement responsible entity.
“A replacement responsible entity is a company that would undertake all the contractual obligations that Gunns Plantations and Gunns had in respect of these woodlot projects.”
Ruddick said that if a company was considering becoming the responsible entity for Gunns it would almost certainly have to restructure the contracts to prevent millions of dollars in losses.
“On the 6th August this year, Gunns put out a statement to the Stock Exchange that its investment in the MIS scheme (being the difference between the future revenues it would get from harvesting etc, less the costs of maintaining those plantations, including the rent) was negative $100M.
“Anyone coming in as a replacement responsible entity would have to determine how they would reconstruct the contractual obligations, to ensure they didn’t end up with this $100M shortfall that Gunns projected.
“They would have to renegotiate the conditions with investors. There are 18 distinct woodlot projects and they [the responsible entity] would have to go though and determine which of those projects they would be interested in.
“The earliest Gunns schemes come into harvest next year and are therefore fairly established trees now. I think the trees that were grown earlier are going to be far more attractive than the trees that go through to 2009.”
