The covered wagons are encamped in a circle.
The shareholder posse is nowhere in sight
The Australian Financial Review today reported Gunns’ bankers had commissioned a Report on Gunns’ balance sheet from insolvency experts KordaMentha to be delivered last Friday, probably to determine the palliative care process henceforth.
And today one of Gunns’ directors Paul Teisseire resigned from the parent company Gunns whilst remaining as Chairman of Gunns Plantation Limited GPL, a wholly owned subsidiary, which acts as Responsible Entity RE for all Gunns’ MIS schemes and the nine ex Great Southern schemes.
It is likely the two events are related.
GPL now has a Board that is independent of Gunns. There is no longer Directors common to both Boards.
At one stage Mr Gay acted as Chairman of both, but conflicts of interest were never a problem for Mr Gay.
GPL recognised possible conflicts that may occur between a RE looking after Growers’ interests and Gunns which has reasonable form when it come to putting its interest before others.
GPL established “sophisticated systems to deal with any corporate governance issues and any perceived, or real, conflicts of interest…. a Conflict sub-committee whose members comprise the Independent Directors only……(and whose)…… charter is to deal with matters of actual, apparent or potential conflicts of interest with the parent company, Gunns Ltd,” to quote from its website.
The only trouble was Robin Gray was appointed first Chairman of the conflict sub Committee, as he fitted the definition of ‘independent’
But things are much more serious now, the time has passed for window dressing.
Again GPL’s website best describes the dilemma:
“In undertaking its role as RE of the Schemes, GPL has fiduciary and statutory obligations to act in the best interests of growers (being the members of the Schemes). GPL also has an obligation to act in the interests of its sole shareholder, Gunns Limited. Where these obligations are in conflict, GPL has an obligation to put the interests of Growers ahead of all others. The interests of Gunns Ltd may not always be consistent with the interests of members of a Scheme or Schemes. This may give rise to certain actual, apparent, or potential conflicts of interests and duties, including a conflict of duties owed by the Board of GPL to Gunns Limited and to Scheme members.”
With impending Administration and/or Receivership, conflicts between GPL as RE and Gunns are inevitable, especially if bankers appoint Receivers, as the case of FEA and its RE company FEA Plantations FEAP clearly demonstrates.
Coincidentally Gunns’ current advisor, KordaMentha handled the Timbercorp windup matter. Growers were left to fend for themselves.
Gunns’ Growers which include the battle scarred Great Southern troopers will need to be handled with a little more care and attention else the mother of all class actions will ensue.
• He was not alone: Another TT expert observer, Jarvis Cocker (All Jarvis here) has been as forthright for as long. Jarvis Cocker wrote this in February:
Gunns Ltd: A pig without lipstick …
Jarvis Cocker
28.02.12 10:55 am
24 comments
When Gunns released its first-half numbers last year, the company made an effort to disguise the woeful performance of the underlying businesses by marking up the value of the Bell Bay sawmill.
Even though Gunns didn’t yet own the mill, the books included `revenue’ of $19 million from an upwards revaluation of the operation. Some journalists fell for what was little more than an ethically questionable attempt to put lipstick on a pig.
There’s no lip gloss this time around, just the festering corpse of the pig.
When John Gay was still running the company, he made a point of letting former premier Paul Lennon know that delays in the pulp mill project were costing Gunns one million dollars each day. Now those prophetic words are true, although perhaps not in the manner Gay intended.
Gunns lost $173.3 million in the six months ending 31 December 2011. That’s pretty close to one million dollars each day, or in other terms, Gunns is losing the equivalent of its entire market capitalisation three times each year. Not unlike its previous native forest operations, Gunns losses aren’t sustainable for much longer.
So what business is Gunns in?
One could be forgiven for assuming the company is in the business of enjoying Government handouts. In fact $23 million of the revenue from `ongoing operations’ is a handout for last year’s deal between Giddings and Gillard.
Perhaps it’s flippant to imply there’s more to come from that source, but if the $23 million hadn’t been included as revenue, the underlying earnings numbers would have looked even more miserable.
A full analysis will follow, but here’s a couple of juicier points from an initial scan of the result:
Gunns has around $9.5 million in cash. That doesn’t sound too bad, until one considers the $120 million in unpaid bills, the $515 million in short-term borrowings and the fact the overdraft has already blown out to $80 million.
Creditors shouldn’t expect payment in a timely fashion this year.
And we all love bank fees. Most of us grizzle when we get slugged with a $5 fee for using the internet too often to transfer funds. But Gunns has agreed to the mother of all bank fees – $29.4 million. That’s how much the consortium of lenders has slugged Gunns for extending the $340 million primary debt facility, and short-term borrowings for 11 months. That’s on top of whatever punitive interest rates are being applied.
In short, Gunns needs more than a white knight. It needs a miracle. Even KPMG are starting to have doubts about Gunns’ solvency.
More later.
And, way back in August 2008:
…
… Except Gunns’ woes have nothing to do with hedge funds.
Instead, it seems that some of Gunns’ largest backers have taken a dim view of last Friday’s statement that after-tax profit would approximate $67 million. Four years ago, the figure was above $100 million. Last year, $88 million. That’s before someone checked the figures, and suggested $74 million was closer to the mark.
In short, Gunns is on the nose in the financial community. Management credibility is shot to pieces, and questions are being asked as to why the ASX wasn’t told of the latest profit slump weeks ago.
And that’s not all. What the media hasn’t asked is why things are so grim at Lindsay Street.
As a student of history, as well as being a long-suffering Gunns shareholder, Jarvis has looked back at the company’s financial records of the last few years.
Gunns does two things very well. Make no mistake, this has been, and could be again, an enormously profitable company. Most of that success has been derived from the processing and sale of woodchips. Gunns’ primary talent has been the ability to buy cheap native forest resources from Forestry Tasmania, and flog the taxpayer-subsidised product to Asian customers at a massive gain.
Their second, and less admirable quality, is their ability to borrow funds at an alarming rate, and spend them on sub-standard assets. Auspine springs immediately to mind – Gunns hasn’t made a cent on Auspine, instead inheriting a debt-ridden, public relations nightmare.
Debt, rather than anything else, explains why Gunns is struggling. And those debt levels are scary. We’ll find out just how bad the position is next week, when Gunns release their preliminary final report.
…
The full article: Gunns: Why things are grim
Gunns: The writing has been on the wall for years. Another Tasmanian Cargo Cult is collapsing/ perhaps has fully collapsed …
First published: 2012-07-23 09:11 PM
• Peter McGlone, TCT: Supreme Court case update
It has been a long time since a number of very generous people pledged financial support to the Tasmanian Conservation Trust which enabled us to commence our Supreme Court challenge to the Tamar Valley pulp mill permit. This case has been progressing very slowly, which is not unexpected, and has not yet got to the trial stage.
I thought you would appreciate an update.
On 25 October 2011, the TCT initiated proceedings in the Tasmanian Supreme Court seeking a court determination that the permit for the proposed Tamar Valley pulp mill had lapsed because the proponent, Gunns Ltd, had failed to meet the permit condition that the project be substantially commenced by the end of August 2011.
In March 2012 Gunns applied to the Court seeking a decision that the TCT should be required to pay a security deposit to the court in the event that TCT losses and cannot pay Gunns’ costs.
On 20 April 2012 the Tasmanian Supreme Court ordered that the TCT is not required to pay a security bond to the court. In making his decision, Associate Justice Stephen Holt cited the fact that the TCT has substantial resources including 19 pledges totally $107,550. [These] pledges clearly assisted us in getting this favourable decision from the Court.
The TCT was greatly relieved that the court dismissed Gunns’ application requesting that we pay a bond. We were also very encouraged that Associate Justice Holt concluded that the TCT’s ‘case has not been shown as lacking merit or weak’ (Paragraph 48, page 10). A full copy of the decision is available on the TCT’s website at www.tct.org.au
Gunns has applied to the court to appeal the decision by Justice Holt and this will be heard on 26 July 2012.
Stay tuned for further developments.
Peter McGlone
Director
TasmanianConservation Trust
• Sale of Green Triangle Investment Units
Please refer to link below for the full announcement:
http://www.gunns.com.au/Content/uploads/documents/ASX%20RELEASE%20-%202012%2007%2026%20-%20Sale%20of%20Green%20Triangle%20Investment%20Units.pdf
