FEA’s Receivers
Deloitte has at last found a buyer for FEA’s land and trees.
Resources
Management Services LLC (RMS) a forestry investment manager from Alabama paid
$125.5 million for land belonging to FEA and trees belonging to FEA’s MIS
growers.
The
sale price confirms that forest assets have continued to plummet in value. The
sale price is a disaster for everyone waiting for a distribution, the secured
and unsecured creditors and the growers.
The
insolvency practitioners stand the best chance of getting paid in full.
FEA’s
secured creditors appointed Deloitte in April 2010, almost five years ago. At
the time secured creditors were owed about $220 million and everyone thought
they would get their money back.
BRI
Ferrier was appointed Administrator at the same time, a position it still
occupies.
Given
that almost all FEA’s assets being secured assets have been under Deloitte’s
control, BRI Ferrier’s task has been essentially to look after MIS growers’
interests being the Administrator for FEA Plantations, the insolvent Responsible
Entity for the various MIS schemes.
In
March 2011 Rural Funds Management (RFM) boldly proposed to reorganise FEA into
a new entity, injecting $85 million of new equity, arranging a bank loan of
$100 million and paying out secured creditors in full.
New
investors were to hold 50% of the new FEA. MIS growers would own most of the
balance with unsecured creditors getting a tiny share. The MIS schemes would then
have been wound up after the growers transferred their trees to the new entity.
The
projected balance sheet of the new FEA entity valued land at $253 million and
trees at $113 million, a total of $366 million.
Had
the deal gone through it is probable that the new entity would now be in liquidation,
given the way values have dived.
RFM
submitted a less favourable revised proposal as did Macquarie Bank. The latter included
a MIS Transition process which involved continuing with the earlier MIS
schemes, those closer to harvest, with a
view to get a better outcome for growers. The secured creditors only would have
had to write off 12% of their debt (excluding subsequent interest and holding
costs). At this stage the secured creditors had already netted about $40
million from the sale of the Bell Bay sawmill to Gunns. Gunns' Receivers subsequently sold the sawmill plus a similar sized mill at Tarpeena, South Australia for roughly the same price to Timberlink Australia P/L, a New
Forests’ company.
A
better return for growers had little appeal for Deloitte, the Receivers. Their
preference was to kick the MIS growers off FEA’s land, sell the land and trees
as one and pocket the lot for the benefit of secured creditors.
There
wasn’t much money coming into the Administrator’s bank account. Not all growers
responded to a tap on the shoulder for additional contributions. The hope was that
by hanging on, the eventual crop would produce greater quantities at a higher price
and the contributions would be repaid with interest.
The
more recent MIS schemes, the 2002 to 2009 schemes were soon found to be hopelessly
non viable and a decision was made to wind them up. This left the 1995 to 2001
schemes still alive, but these shrank as non viable coupes especially on leased
land were cast aside.
Winding
up MIS schemes needed grower approval. As did selling trees jointly with the
sale of land by Receivers given that Receivers hadn’t yet evicted their MIS
tenants.
Growers
agreed to allow the Administrator to negotiate a joint sale of land and MIS
trees, or a one line sale as it was termed, if the potentially more lucrative
MIS transition, where land was sold with the MIS schemes remaining in place,
albeit with a new Responsible Entity, was not possible.
But
potential land buyers showed no interest in a MIS transition. Not surprising
given the grief that has resulted from MISs.
A
one line sale was the only remaining option.
Gresham
Advisory Partners were appointed by Deloitte to handle the sale about a year
ago. Approximately 97,900 hectares of land growing about 46,200 hectares of
plantations was advertised. The Australian reported at the time an expected
sale price between $200 million and $400.
The Administrator believed the expected figure was $283 million whereas
he thought between $225 million and $265 million was more likely.
Overall FEA planted about 70,000 hectares of plantations, roughly half in Tasmania, the rest in NSW and Queensland. Most were grown on FEA's land but some were on leased land. The trees on the sold land were the MIS crops across all schemes, from 1995 to 2009. The median age of the trees was about 12 years.
Overall FEA planted about 70,000 hectares of plantations, roughly half in Tasmania, the rest in NSW and Queensland. Most were grown on FEA's land but some were on leased land. The trees on the sold land were the MIS crops across all schemes, from 1995 to 2009. The median age of the trees was about 12 years.
The
final price was $125.5 million. This amount is now in Deloitte’s hands. Deloitte plan to retain $20.5 million to
cover sales expenses and their fees. An amount calculated by an unknown formula
jointly agreed by the Administrator and the Receivers and ok’ed by the Court,
will then be paid to the Administrator mainly for the MIS trees. Deloitte will
pay the balance of the sale price to secured creditors who will have to write
off at least half of the debt owing, much more if holding costs are taken into
account.
It is not known whether ANZ is still the major secured creditor or whether its debt was sold a la Gunns. If secured creditors lose half their dough when initially it looked like they would get it all, it means someone has badly misjudged the situation. At a guess Deloitte won't be listing it as one of their crowning achievements.
It is not known whether ANZ is still the major secured creditor or whether its debt was sold a la Gunns. If secured creditors lose half their dough when initially it looked like they would get it all, it means someone has badly misjudged the situation. At a guess Deloitte won't be listing it as one of their crowning achievements.
BRI
Ferrier as Administrator will then take their fees from the amount received
from Deloitte, before splitting the rest between repaying contributions made by
growers during the administration period, small amounts to 2002 to 2009 growers
whose schemes are being wound up, unsecured creditors who were told to expect 6
cents in the $, and the balance split between 1995 to 2001 growers.
BRI
Ferrier have described the final sale price as ‘very disappointing’ which leads
one to think there mightn’t be enough in the kitty to pay BRI Ferrier’s fees in
full, let alone any left over to dribble out to growers and creditors.
$125
million for 98,000 hectares with 46,000 hectares growing plantations
12 years old is an unbelievably low price, much lower than the price paid by
New Forests for Gunns’ land and trees. The price is possibly even lower than that
paid by FEA over 15 years ago for acquisition of what was then cleared
agricultural land used for pastoral and cropping pursuits.
With
so many MIS assets for sale at the same time, inevitably prices were affected. But
the Administrator believes the cost of the remediation of the plantations back
to productive agricultural land was a significant driver for the price
ultimately achieved.
FEA's land estate is smaller than Gunns' and possibly more widely dispersed from port facilities and other end users, which means than replanting may not be as attractive. Which in turn means that alternative land uses are used to value land. If the land has to be remediated the value of land with plantations may suffer.
FEA's land estate is smaller than Gunns' and possibly more widely dispersed from port facilities and other end users, which means than replanting may not be as attractive. Which in turn means that alternative land uses are used to value land. If the land has to be remediated the value of land with plantations may suffer.
The market has determined that plantation trees with a median age of 12 years are worth less than the costs of remediation.
Minister Harriss and his acolytes are still attributing all blame to the Greens but it's difficult to find supporting evidence for such an assertion in the case of MIS schemes. The risk is if the analysis is flawed any government policy to address problems will be wrong.
Minister Harriss and his acolytes are still attributing all blame to the Greens but it's difficult to find supporting evidence for such an assertion in the case of MIS schemes. The risk is if the analysis is flawed any government policy to address problems will be wrong.
It
is not known whether the new owners RMS will replant or will remediate. The RMS
website is a bit scanty. RMS is a relative newcomer to this part of the world.
It is an investment manager meaning it manages other people’s money. Who those
other people are, is not known, whether they’re residents or foreigners.
The
passing of FEA has been occurring almost without notice. Not surprisingly most people have lost interest.
The
complexity of insolvent MIS schemes has been mindboggling.
Five
years to get to this stage is ridiculous.
And
there are still 1995 to 2001 MIS trees growing on third party land which are expected
to be harvested in the next 12 months before those schemes can be officially
wound up. They’re unlikely to result in a windfall for growers as there’s back
rent owing and post harvest remediation costs to consider. The third party land
owners need to sign Forest Practice Plans (FPPs) which require a post harvest
plan so they have some leverage when a harvest plan is contemplated.
Deloitte
as Receivers, because it acts for a small number of secured creditors doesn’t
bother telling a wider audience what it’s up to unless it has to.
BRI
Ferrier as Administrator is obliged to divulge a little more, especially as it
needs to maintain minimal contact with growers whose interests they’re supposed
to be looking after.
At
no stage however have the Administrator bothered to tell growers how their trees
were growing.
As
with the wind up of other insolvent MIS companies, the Administrator/
Liquidator tells of his argy bargy with the Receivers and his court room stoushes
but nothing about the status of the assets entrusted to him.
Trees
grow, some die, some coupes have been discarded from schemes, some external
leases have been forfeited, a lot of grower woodlots don’t exist any longer.
Growers don’t know. They haven’t been told. Not a whisper. One would have
thought growers who obtained a tax deduction because they were supposed to be carrying
on a business of primary production with specific woodlots allocated to them,
would be told how they were going, maybe if they still existed?
Growers
have been starved of information, forced to grant the Administrator permission to
a certain course for fear that things will be worse if permission is not given.
The
growers have been treated appallingly, first by the spruikers who sweet talked
them into the deal in the first place, then the companies that planted the
trees and now by the administrators entrusted with seeing they get the best
deal. The Courts have pursued a narrow brief and ASIC no brief at all.
If
ever a grower needed to take action against those who have misled and defrauded
, information about his specific woodlot(s) would be useful. Not providing the
information is grossly remiss at best, as if there exists a conspiracy amongst the brotherhood.
Growers
have been shafted by everyone.
And
taxpayers who have underwritten this giant fraud can’t even obtain minimal
information on growth rates, yields and prices should they ever contemplate a
repetition of this monumental disaster
The
only beneficiaries of the prolonged insolvency administration has been the
insolvency practitioners themselves.
Little
wonder there wasn’t a blaring media release announcing swathes of rural
Tasmania are now controlled from Birmingham, Alabama.
Further evidence that ASIC remains asleep at the wheel. I s'pose now that the abbott boys have enabled them to spy on all of us it might help chase down the fraudsters.
ReplyDeleteThank you Mr. Lawrence for your commentaries and analysis of this MIS debacle over the past 3-4 years.
ReplyDeleteHow could any result be so far from the original promise, unless it is a scam.
You have revealed Australia's latest Ponzi debacle, but I'm sure the spruikers and supporters, and legislators led by the nose will none of them suffer.
Casey.