Tuesday, 9 March 2010

FEA treading water

Forest Enterprises (FEA) are suspended from the ASX not because they’re in the midst of discussions with their bankers, but because they are in breach of ASX listing requirements.

They are yet to file their half yearly report due by the end of February 2010.

FEA are currently insolvent because the banks intend to test their loan covenants by using the yet to be released results.

They’ve now been in breach of banking covenants for 9 months.

The banks chose not to apply the tests to the 2009 results, giving FEA time to restructure.

FEA had the benefit of watching Great Southern and Timbercorp being mauled by their bankers in their dying days.

They must have missed the lesson.

Perhaps another case of history repeating itself because no one was listening the first time.

It seems the penny may also have finally dropped for Gunns given their belated restructure proposals..

The Examiner reported on 4th March that “a Government rescue package is being developed to assist Forest Enterprises Australia in the same way as a $12 million low-interest loan saved King Island’s abattoir from closure last year”.

But even the Premier Mr. Bartlett, imbued with a humble self assessed prescience in matters forestry (he recently described his opponents as clueless) is now believed to be against creating a world first by giving a loan to an insolvent Company.

Press reports highlight that FEA is suspended from the ASX not on the more salient question of whether they’re trading whilst insolvent, and the consequences that may flow.

Is FEA continuing to trade? Does this mean the Directors are personally liable for undertakings henceforth made by FEA?

Is FEA continuing to take supplies of radiata from the FT/GMO joint venture for their Bell Bay sawmill?

If so, has Mr. Bartlett given any undertakings to the Directors of FEA that they will not be liable to pay for the logs in the event of FEA’s default?

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