Tasmanian Times

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We serfs, indeed, have a new feudal landlord …

Kleptocracy, Anchorage, New Forests > New Potato …

The Receiver / Liquidator Kleptocracy

Yes, Tim Thorne ( Comments HERE ), this Receiver/Liquidator kleptocracy operates without remorse with no proper constraint applied by the Court – the most inexcusable lack of oversight in the whole saga. It’s because of my strong criticism of the Court and disclosure of confidential information that I gave my Senate Committee testimony in-camera.

On the phone I queried Bryan Webster, KM lead; “… even if you could disclaim all growers forestry rights, why would you? – when the debts of Gunns were not the debt of growers” …. [mute]. He personally has no answer, but directs his lawyers to use that ultimatum at every opportunity.

KordaMentha believe they have saved the Gunns business, just as they have saved Willmott, Timbercorp and Great Southern. Sure there are new corporations conducting these forestry and timber businesses, but on behalf of offshore owners and investors. A fair restructure would have seen existing growers get the present value or converted to a share in the new enterprise. The trees are still growing after all, and harvesting can be timed and sized to meet market demand.

KM most certainly should not have appointed (again) PPB as both GPL Liquidator while still Responsible Entity/Administrator for the schemes. KM and PPB’s motivation is the extraction of extravagant fees, NOT in protecting all stakeholders. While ASIC and the Court allowed this compromise to continue, these firms have smugly celebrated the rolling collapses of the MISs. Any Royal Commission should look into this undermining of the independence of the REs.

The Anchorage Windfall

The Anchorage connection while disclosed in the press, eg http://www.businessspectator.com.au/news/2014/4/24/mergers-acquisitions/new-forests-buy-gunns-about-330m; has not featured in any of public court documents that I have seen. That still leaves a mountain of the most interesting ‘confidential’ details.

ANZ Capel Court was the Trustee of a consortium of bankers that bankrolled Gunns. On entering administration, the ANZ of behalf of ANZ, Mizuho Corporate, BOS International (Westpac), China Constriction Bank, Nordea Bank Finland, Sumitomo Mitsui, Norddeutsche Landesbank had lent $445.7M to Gunns against a fixed and floating charge (every asset, ever imaginable), signed off by John Gay and Wayne Chapman on 1st Feb 2007. With no 2007 scheme, but ones in 2008, 2009, this timing is likely to have been associated with the consolidation of Gunns pulp mill ambitions, first announced Oct 2004.

It’s reported Anchorage bought the debt for 40-45 cents in the dollar in April 2014 ($178-200M). Gunns related asset sales approximate $350M. Less distributions of $40M for GPL, $40M for Great Southern and $1.4M for Tumbarumba leaves $268.6M. Anchorage has realised ~$68-90M for a calculated risk and that mouse click.

If the consortium participants shared equally in the funding obligation (otherwise is not suggested) their exposure was $63M each. After the Anchorage deal, the ANZ has lost $35-38M on the Gunns collapse. That’s the sum for which the ANZ was prepared to forego an Australian restructure, distance itself and work on repairing its reputation.

This is small change in comparison to the billions lost by grower investors and taxpayers. The former believed they still had a physically growing asset with some value in the future. But NO, these rights were to be challenged by a party with NO relationship to them and to whom they owed NOTHING – the Receivers clients, those same banks. The Court takes comfort in ‘commercial negotiation’ because it diminishes their accountability for the outcome.

The MIS Sale Playbook

The GPL RE/Liquidator did not sell the Tasmanian trees, they let the Receiver do it in a pool for them. The GPL RE/Liquidator thought they had sold the NSW trees to Global Forest Partners, but the Receivers wouldn’t transfer the sub-leases to them (much better to push it out another year and then complete the same sale with the same buyer on Receiver terms).

Once party to a pooled sale, our RE/Liquidator does not secure a present value minimum amount for their no-fault growers, no they charge growers, not the business, for the valuations and then hide them away. Then the faux commercial negotiation begins on a non too subtle shared responsibility basis.

The playbook is most evident in the Tumbarumba hearings as Justice Judd refers to the specific values in his judgement. The Receivers threw an opening gambit of $500,000 for all forestry rights on the table, then begrudgingly offered a low ball 6.9% share with no justification. The Liquidator apparently fights for some supporting detail. They get it and counter-offer with something they think they could justify in court – in this case 25%. The Receiver then undermines any separate sale of trees (not land or plant), threatens interminable legal action and the loss of all grower rights. With the Liquidators under time duress, they finally make an almost mid-point offer. In this case of 15% and that is agreed. Valuations and volumes are kept confidential, to the extent that Court does not see them in full or context. No Court copy is filed.

Growers are to receive a small share, at best 50% of valuation, and thereby subsidise the banks.

The Gunns MIS Allocation

The ANZ Capal Trustee and Gunns Limited are most culpable in this misadventure, and over the procession of collapses have destroyed the realisable value of growers trees with ever diminishing sale precedents. Despite growers funds surplus to establishment being misappropriated in the pursuit of a pulp mill and 200,000ha feedstock estate, they are to receive $81.4M BEFORE liquidation costs of >$32M to date (GSP/GPL ~$16M each to date). The RE did not borrow from the Gunns banks but have subsidised them at sale, again.

KM as King Maker

And what should we make of the curious Southern Cross Forests purchase of the valuable Tumbarumba estate? Global Forest Partners had made a direct offer before, why now purchase via a company under KM Receivership, and in default with the ANZ itself. Did KM expedite a FIRB approval? Did KM clip the sale for the ANZ , as a buyer’s agent?

New Forests – New Potato

New Forests raised a $707M war chest to acquire distressed ANZ timber assets they promoted as worth $3-4B to their investors. It included Gunns as a target, which “was considered the last basket of timber that can be secured in a politically stable country.” Timed to perfection, just before early plantations fall due for harvest and sustaining proceeds flow, the marauders moved on our trees and got the land unencumbered as well.

New Forests is just one harvest away from New Potato and New Dairy.

We serfs, indeed, have a new feudal landlord.

*Trevor Burdon is a business and IT consultant based in Melbourne. A Tasmanian interested in sustainable inputs to Tasmanian forestry industry, he invested in early Gunns MIS clear wood schemes. Uniquely he has appeared as a individual contradictor in the Gunns’ Liquidation proceedings, and was an in-camera witness to the Senate Inquiry into MIS schemes.

TT MEDIA HERE where there are permanent links to what the Pollies say …

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17 Comments

17 Comments

  1. Trevor Burdon

    March 23, 2016 at 9:18 pm

    #15. Thanks Alison. Using the ubiquitous search engine I find the Oct 2006 Prout Hobart “Water, Food and Forests” Conference, and the Feb 2007 Landline “The future of Managed Investment Schemes” transcripts. Do you have any earlier references?

    In 2007, Robert Belcher did suggest that investors would be the losers. His assertion that the tax concessions amounted to avoidance and not minimisation is incorrect.

    2006 was the year in which the forestry MIS industry reached fever pitch. At this point the money flooding in severely compromised land use planning and regulatory oversight. If not before.

    I note Mr Veneer is now silent. Memories are readily conflated to suit one own’s bias. My decision to invest was driven not out of support for Gunns forestry practice as it had been (far from it), but to give them something else to cut down.

    As Peter WW is highlighting, many grower investors with good intentions have been robbed in the MIS collapses. In fact they stumped up the money which carried many regional areas through this period. They were robbed, not only because the forestry experts and promoters misled them on potential yields, but because the financial backers came after them in the courts.

  2. Mike Bolan

    March 23, 2016 at 3:24 pm

    Trevor @14. Thanks, their culpability duly noted and they were probably just pushing credit because that’s how they make money and it forms the basis of issuing new money (i.e. growth).

  3. Alison Bleaney

    March 23, 2016 at 10:36 am

    # 9 Robert Belcher was screaming warnings re MIS well before 2006 …he would be good to talk to.

  4. Trevor Burdon

    March 22, 2016 at 10:13 pm

    #12 Mike the banks were busy selling money in the form of loans to growers. The CBA, ANZ and Bendigo and Adelaide Bank, are implicated in that they bundled finance applications with PDSs, and let unscrupulous planners sign individuals without due regard for their credit-worthiness. Some still practicing planners signed growers up to loans without full disclosure. This has ended very badly for those individuals. I don’t know whether Gunns Finance was supported by the ANZ in this activity. Planners were rewarded with commissions on the woodlot and finance sales.

    In the case of Willmotts, the CBA was lending to growers in the last fortnight(?) before they (CBA) pulled support for the company throwing it into insolvency for a relatively small sum of money. It was ~$1M I believe. The CBA then resisted attempts by Willmotts to restructure.

    There are numerous cases of financed growers whose trees were never planted. They are in default to the banks, with no tree asset ever established. As liquidation sales complete, the stand-still agreements are cancelled and usurious rates of up to 15% pa applied, back-dated for up to 5 years in the case of Timbercorp. Legal advice to Timbercorp growers was to not pay in the interim. Well they are paying now (banks and lawyers); many under hardship arrangements.

    #4 #9 Mr Veneer, you will be interested to know that those 31.700 ha 2006 Gunns lots are tracking at 53% of forecast yield, which aligns with the poor performance you have heard about and relied upon.

  5. Jack lumber

    March 21, 2016 at 11:40 pm

    Re 11 thank you a fair score
    Have to be careful with some veneers as can be unglued or delaminated under certain conditions . Evidence suggests is occurring with an alarming and increasing frequency

    Re 8 I take umberage , no economics has been discussed .
    Please explain why you think so ?

  6. Mike Bolan

    March 21, 2016 at 10:15 pm

    Simon @10 Fair enough and MIS cost us around $6 bn which is a very large sum of money. What you say about banks is true and they are going to do that anyway. In the MIS case, I don’t think the banks were pushing the schemes. I’d expect whoever hoped to be among the winners to be designing the entire initiative – Poyry yes, but they didn’t end up with too much of the $6 bn since they didn’t sell a mill. ER at Ta Ann, yes, certainly a winner, but not in the hundreds of millions class. The more that is revealed, the closer we’ll get to the source I imagine.

  7. Trevor Burdon

    March 21, 2016 at 9:50 pm

    #7 Sorry I really don’t have any experience grading forestry products.

    I’d surmise the veneer has been peeled off a different log, but is from a closely related species known to the latter.

  8. Simon Warriner

    March 21, 2016 at 8:33 pm

    re 5, and who the politicians were really working for when they passed the legislation that enabled the scam that was MIS plantation forestry.

    A hint, it certainly was not their supposed constituents.
    Mike, You asked elsewhere who the winners were, based on where the money went. I submit that is the wrong way of looking at it.

    The winners are the banks writing the loans. They originate the original loan amount out of nothing, free and gratis, they get to charge interest on that amount, and they get that original loan amount back as well. EVERY TIME.

    No wonder they were prepared to sell the loan book for cents on the dollar. It cost them nothing!

  9. Trevor Burdon

    March 21, 2016 at 8:01 pm

    #4./ Vincent, I invested in 2000(Willmott), 2001-02 (Gunns) to make a return and to protect escarpment and heritage forests. I visited each area and toured Gunns plantings and facilities with a local, environmentally knowledgeable farmer. I sourced and read expert forester and advisory reports.

    By the end of the 2002 schemes, Gunns had only planted 17,000 ha, in total. Early years were generally well-sited, and today 2002 is tracking at 116% of forecast. So my trees have done better than expected.

    Late 2004 came plans for a mill and then a requirement for 200,000ha to feed it. The 2006 scheme was for 31,700 ha, growing the estate by 60% in one year. This was crazy.

    You would be right to think many MIS forests have under-performed, but they are not mine. Nor have they failed in all respects – ask ABARE who reported a quadrupling of export income in the past decade.

    I AM curious to see any widely available 2002 reference. To make your point it should highlight insolvency risk and its impact on MIS Responsible Entities. You know, the well-known practice of stealing your tenant’s property to pay your own rent – that’s what I’ve been writing about.

    Do you have that? … should be easy if someone was screaming warning.

    (BTW MIS Constitutions, Agreements and Sale Agreements, may just as well have never been written. They are ignored in the Court. Even pruning/thinning proceeds held by custodial services are yet to be released to growers!?$%)

  10. john Hayward

    March 21, 2016 at 7:26 pm

    Are we seeing black comedy when we witness Trevor asking and Lumber answering a question about Tas woodchip economics?

    John Hayward

  11. Jack Lumber

    March 21, 2016 at 5:58 pm

    Trevor just looking for some feedback
    Using a scale of 1-10 can you rate my response and to enable some benchmarking can you compare it to say #4

    Good luck with this topic and associated activities

  12. Jack Lumber

    March 21, 2016 at 3:18 pm

    re #3 Trevor its a good question that a few have been pondering over

    I have no idea regarding FORICO nor any inside running , lets make that clear .

    But New Forests to date appear to be following a pulpwood regime . Even though they own the ex FEA mill ( that is another story re Receivers not acting in the best interest of any party bar themselves . Hello DTT !!!)

    If i was going to write to them and franky it will annoy them , maybe ask them as a FSC certificate holder what are their silvicultural management objectives as covered by Principle 10 of FSC. and how is that maximizing value of the estate . While there has been no active sawing of nitens since 2010 , there have been log exports which i understand a number of estates have been involved in i.e there are markets

    You could perhaps then mention that part of the estate is PY 2002 Option 2 that was established for a clearwood regime and inquire if it is being still managed for sawing or solid wood exports or there has been a change in that silviculture objectives and outcomes since the certificate was transferred from Gunns Ltd to FORICO and if so, have they notified stakeholders as well as their certifying body

    Do you know the difference between a zombie and a RM/Adminstator??

    A One can be slayed and was once human ?

  13. Mike Bolan

    March 21, 2016 at 2:51 pm

    Well done Trevor. You and John Lawrence would scare the pants off the establishment if you got together!

    What’s being revealed is how the powerful control just about every aspect of our lives in our ‘democracy’ and how the systems are so biased in their favour that it’s a permanent win for them, and a permanent loss to the rest of us.

    The info is starting to reveal who is really in charge.

  14. Vincent Veneer

    March 21, 2016 at 2:29 pm

    Again, I agree with Jack Lumber. Japan is a much larger land mass than Tasmania and should be exporting plantation billets to Smithton.
    The new normal is that much of the land in Japan is too radioactive for food production. That makes it ideal for plantation forestry.
    No wonder New Forests is going Japanese?

    Trevor Burdon. Why did you invest in Gunns plantations anyway?
    You can’t say you wern’t warned?

  15. Trevor Burdon

    March 21, 2016 at 1:11 pm

    Jack, is there any way to keep tabs on the 2002 Option 2 pruned trees, please? Is any of it likely to be thinned and managed through to clear wood? (As you may know it was sold as if destined for pulp, with no recognition of the pruning fees collected.)

  16. Jack Lumber

    March 21, 2016 at 11:44 am

    a fair summary and possible prediction.
    Of the current plantation the estate it is likely
    50% will be replanted /25% reverted to agriculture and the balance will depend on HBU ( highest and best use) which is a mix of commodity price /FX and land price

    New Forest has moved on from Tas and Australia for that matter and is now focused on NE Asia investments viz the new equity owner Mitsui and also a statement made to the market in Nth America re seeking investors in Japan

  17. Tim Thorne

    March 21, 2016 at 11:02 am

    Thank you, Trevor, for this account. It would be especially interesting to have answers to the questions you pose about the Tumbarumba sale.

    It shows how much we need an overhaul of commercial law, regulations and procedures concerning “commercial in confidence” and related matters, not to mention the privileged position of banks.

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