Gunns investors get worried

Tom Arup The Age
In January 2008 Gunns had just received a new line of credit from their bankers of 12 years ANZ. That credit was then spent on a number of small Tasmanian logging firms and used to begin the initial approach for a takeover of Auspine. But Gunns was also carrying a large amount of debt, and by spending very quickly the extra credit they had been extended the four investors (and it is said ANZ) became worried about the practices of the board who were not reigning in the expansionist executive director (and chairman) John Gay. Two of the investors, namely Perpetual Ltd and Perennial Investment Partners, also asked that Gunns put more international experience on the board. Both companies were worried that while rapid expansion was occurring, it was only happened within the Tasmania borders. They were particularly worried that Gunns had only one plan to expand its revenue base and increase its operations for the offshore pulp market; the pulp mill. It was not know whether concerns about the pulp mill project were being expressed directly in January, that would certainly come later, but a lack of a back-up plan if the mill wasn’t built certainly was. There were some doubts in January from analysts whether the project could attract the $2.2 billion in funding it needed, in fact there had been doubts for a while. Certainly there were doubts enough for ANZ who pulled out from funding the project in May 2008. ANZ partly let the rumour develop that they had done so because of environmental principals. But those who know suggest that is only a very small part of the decision. ANZ was only set to finance 5-10% of the mill and were perturbed that five years since the project was announced no other financiers had come on board. At the same time ANZ was writing massive amounts of money off from failed stock broking firm Open Prime and had many other money problems relating to the global financial crisis problems. Read more here