Timbercorp investors at the crossroads
Timbercorp administrators Korda Mentha has written to forestry scheme investors giving them two options for the future of their investments.
The first is to recapitalise the schemes by appointing a new responsible entity (RE), which will require a significant cash input.
“Any new RE would require significant capital backing to cover the $170 million cash flow shortfall over the remaining lives of the schemes,” the letter said.
“Or it would have to raise that amount from growers or meet those cash flow obligations by a combination of both.”
According to the administrator, none of the potential REs have said they would inject that amount of money into the schemes.
“Instead, they have proposed raising most or all of the further funds from growers,” the letter said.
“Our preliminary legal advice is that there are no powers under the scheme governing documents which permit increasing fees or imposing new fees.”
Korda Mentha said most of the potential REs just want access to the timber in the schemes and would prefer to buy them on an unencumbered basis.
A spokesman for the administrator said Korda Mentha would welcome a new RE to the forestry schemes, but there were legal responsibilities they must take onboard.
“They have got to understand the legal responsibilities of being an RE and take on all of the debt and the contracts,” he said.
“Most people who have approached us about being a RE have shied away, and that is why we are letting the courts decide what the proper course of action is.”
The alternative for investors being proposed by Korda Mentha is the sale of the land, trees and industrial equipment and assignment of the leases as a package.
“We have received significant expressions of interest to acquire Timbercorp’s forestry assets, including trees from both local and international sources,” the letter to investors said.
“Through a sale of assets on an unencumbered basis, proceeds received from the sale of trees can be treated as harvest proceeds that would otherwise be distributed to growers in due course.”
Korda Mentha said this option could only be achieved through the early termination of the forestry schemes, either under the terms of their governing documents or by order of the court.
The administrator plans to apply to the courts to seek an early termination of the schemes to allow the asset sales.
“We realise that not all growers may support this approach and the court will again provide a forum for these voices to be heard and the various views to be carefully considered,” the letter said.
Meanwhile, Korda Mentha is applying to the Supreme Court in Melbourne today about the future of the almond and olive schemes.
The schemes need $300 million to enable next year’s harvest to proceed and the administrator is asking the courts for a direction of what to do.
Recommended for you
A Supreme Court of Western Australia jury has issued its verdict regarding unregistered MIS operator Chris Marco, who was on trial for 43 fraud charges, with ASIC stating the verdict ends a “sorry chapter”.
ASIC has released the results of the latest adviser exam, with August’s pass mark improving on the sitting from a year ago.
Financial advice practices may be hiring younger or professional year advisers as a succession option, but they may find they are unable to put up the capital if the adviser looks to retire.
Any changes to product labelling for sustainable funds must be applied consistently across investor channels, including those used by financial advisers, according to RIAA.
