According to the Sydney Morning Herald insolvency firms are circling Tasmanian woodchip exporter Gunns, jockeying for the job of taking on management of the company should it fall into administration following a $904 million loss. Sources: Sydney Morning Herald, ABC News, Business Spectator
The Sydney Morning Herald believes Gunns’ syndicate of lenders, led by ANZ – owed $560 million, was considering appointing receivers last month.
KordaMentha has been examining Gunns’ solvency on behalf of the banks and is believed to be in the box seat to take any eventual appointment.
Gunns has sustained write-downs of $796 million on its Bell Bay pulp mill project, and forestry and timber processing assets but remains solvent, according to its 2011-12 accounts.
Gunns said earnings in 2012-13 were ”likely to be materially less” again, given woodchip selling prices and sales volumes had fallen drastically this year and there was no recovery in sight due to an oversupply of plantation woodchips from Australia and an expectation our dollar would remain high.
The company reported a net loss after tax of $904 million in 2011-12, which follows a $356 million loss the previous year as the company tried to exit the native forest woodchip business and focus on development of its pulp mill.
The mill was to use plantation-only timber,as part of negotiations towards a Tasmanian forestry ”peace deal” announced in late 2010. Almost two years later a deal, which might have resulted in financial compensation for Gunns for exiting native forests, has not been concluded.
As it flagged in early August, Gunns is no longer confident that the $2 billion-plus pulp mill, which has the necessary state and federal approvals but which remains contentious, will go ahead. This has forced the company to write down $217 million spent so far on the project.
Gunns said ongoing lender support was required to stabilise operations and it noted that ”the company has continued to engage with its lenders and has also continued its negotiations and diligence process with potential investors regarding a potential capital raising, restructuring or other alternative transaction”.
Gunns requested a continuation of the six-month suspension of its shares from trading on the stock exchange. The shares were suspended at 16¢ a share in March after a planned recapitalisation in partnership with Hong Kong billionaire Richard Chandler collapsed.
After the write-downs and after this week converting its ”Forests” hybrid securities to ordinary shares – wiping out any expected return for those investors – Gunns reported its net asset backing would be 1.8¢ a share.
Cash flows improved as a result of asset sales garnering $81 million during the year, including the Green Triangle forest estate, the Heyfield and Southwood sawmilling operations, and the Triabunna woodchip mill sold to wealthy conservationists Graeme Wood and Jan Cameron for $10 million in July 2011.
Asset sales garnering a further $139 million continued after June 30. These included the Portland woodchip export facility sold for $62 million in July and Gunns’ head office in Launceston, sold in August for $13 million.
With timber mills assets in South Australia, plantations in Tasmania, as well as the pulp mill project, Gunns is valued at around $24 million.
