Gunns shares have lost 26% of their value during their first week back on the ASX.
I have been asked if this makes any difference to Gunns solvency. The answer is no.
The only difference as the share price collapses is the size of the hole in a Gunns shareholder’s pocket.
The market, as distinct from the Directors of Gunns, values the shares in the company as the number of shares divided into the surplus of assets over debt, in Gunns’ case with little or no Goodwill.
While there is a quoted share price the market considers that the assets exceed the debts.
Further, the ANZ, which is liquidating the assets, will stand behind the directors with words of comfort so that they can argue that the company will not trade whilst insolvent.
Why would the ANZ do this? The answer is that it is in a position to control the incoming cash payments such as the IGA $23 million and the $107 million from the Gunns Green Triangle sale, whilst still holding a mortgage over the remaining assets.
On the 24th June 2011 Gunns, in a statement to the ASX, stated that Gunns’ Green Triangle assets had been sold to America with settlement on 31 Oct 2011. “The money would be used to retire Debt”.
It should be born in mind that the sale was negotiated by ANZ Corporate Advisory Services on behalf of Gunns.
This ANZ controlled entity sold these Gunns assets with a book value of $254 million for $107 million a price that must have made the Auditors of the still unaudited accounts wince.
It should always be remembered that the ANZ is in control of Gunns affairs and they have been calling the shots for a long time.
I suggest that from 1 November, should the American money be paid, the ANZ may take a different view over comfort and the liquidators could well be appointed.
One remaining asset of value should liquidation occur is a pulp mill with valid ermits, hence the pressure from above on the ducking and diving Green, Giddings and the luckless Schaap, all of whom have to defend the indefensible.
Thus is the art of politics!
• Barnaby Drake
Dear Mr Hewitt,
As an ex-client of yours, I am writing you an open letter about your forthcoming sale of Gunns water assets on 4th November with a copy to tasmanaintimes.com
Please be very careful about this sale as you could involve yourself in many and complex legal problems! I will elucidate just a few matters of concern. There could be others.
Water is not like real estate sales. There is no land registry of dams or any other specific reference to what you are selling. You are selling a ‘right’ to something that may not even exist or that the vendor may not have the permissions to re-allocate. Each and every sale will need specific documentation. You could find that the so-called ‘right’ exceeds the specific supply and the water does not exist. It is like selling twenty acres of land only to find that there are actually only five acres in existence. A typical case is the Murray Darling River where the water supply has been over-allocated and the ‘rights’ cannot be met in practice. Then there are all the environmental problems associated with this.
Further, there could be access problems to the water from dams, as the purchaser may need to lay pipes across someone else’s land. Gunns themselves are having such problems with their pipeline from Trevallyn Dam! There is no guarantee that the maximum dam capacity levels can be achieved or maintained, especially under drought conditions when the water is most needed. The headwaters that feed the dam may not belong to the vendor and there is no guarantee that the water supply can be maintained, especially where farmers above the dam are preparing to grow plantions themselves and need up to six times the amount of water as is used in normal forestry or agriculture!
There may be further legal problems involved if the dams were built to feed MIS plalntations. Under the scheme, the timber belongs to the investors but the land belongs to the administrator of the scheme. If this is the case, the timber owners could have a claim upon this water supply and may contest Gunns rights to sell this water as it diminishes their ability to grow their asset.
Here the problems could be even more contentious. Apart from the obvious of ‘who owns the natural water that flows down a river’, Gunns were given access rights to this water at highly reduced commercial rates to supply water for the pulp mill. This was done as a ‘concession’ for a project, which at the time was classified as a ‘Project of State Significance’ (PoSS). There is a legal possibility that the permissions to construct this mill have expired and the project is now extinct. There is currently a legal challenge before the High court to determine exactly that matter, and if the court rules in favour, then this PoSS is extinguished, and the water rights will possibly be extinguished with it! This judgement will probably NOT be given before your projected sale date, which could leave you in a very difficult position. Purchasers will sue YOU, not Gunns if these rights cannot be fulfilled!
It is therefore absolutely essential that you receive all the necessary documentation with each of these individual rights before you sell them and that you do not accept them on face value but get legal opinion on them as well. Peak water levels as measured in dam capacities are not necessarily an indication of the water in them. (Note. Gunns are desperate for money and some of their accounting practices have been severely criticised recently.) It might even be advisable to contact the relevant government department as to whether there is a clause in their agreement that allows an on-sale if the company so wishes and what restrictions may be put on these rightss if they are not used by Gunns. Farmers with even more expensive rights have severe restrictions put on them for water usage and metering during dry seasons, rights which do not necessarily apply when applied to a factory needing a constant water supply for its processing.
I regret if this dampens your expectations but hope you find this warning helpful and that you heed this advice. It may be better to be safe, than sorry.
• Susan Austin, Green Left Weekly interviews TAP leader Bob McMahon
Currently, plantations established since 1994 on cleared native forest land — which is the bulk of Gunns’ plantations — are not eligible for certification.
TAP, as a member of FSC Australia, as well as other members including Timber Workers for Forests, will apply to FSC International in Bonn to have FSC Australia exposed or even wound up.
The IGA — the Intergovernmental Agreement also known as “In Gunns’ Arms” — has played right into Gunns’ hands, to continue the anatomical parallel.
Right [from] the beginning, the forest roundtable … [was] always about delivering desired outcomes for Gunns and public money to a failed industry, in exchange for the conservation of native forest.
Gunns and both state and federal governments have always asserted that this process has been community driven and has thus delivered Gunns and the proposed pulp mill a social license.
In reality the community has been deliberately excluded from the process. As a result TAP regards the process as illegitimate, unrepresentative, secret and elitist.
The three major environmental NGOs involved in the forest agreement — The Wilderness Society (TWS), Environment Tasmania (ET) and the Australian Conservation Foundation (ACF) — remain opposed to Gunns’ pulp mill. Have they remained active in the campaign? Do you think their involvement in the forest agreement has weakened the united campaign against the pulp mill and if so, how?
ACF was never active in the campaign. In fact, Don Henry and Lindsay Hesketh (as well as Sean Cadman) accept that the Tamar Valley pulp mill is a fair exchange for a cessation of native forest logging.
TWS and ET dealt themselves out of the campaign in favour of the deal, and can now never return. While they still may say they oppose the pulp mill, but not a pulp mill, they are in a weaker position than the Tasmanian Greens.
As for the Tasmanian Greens, who have disappointed so many of their supporters … They say they are opposed to the Tamar Valley pulp mill.
But by their actions in supporting the “forest principles”, which included in-principle support for a pulp industry and the shonky process that produced the principles as well as compensation money (they call it “buy back”) for Gunns, they have facilitated the furtherance of Gunns’ pulp mill aims.
But, the Greens claim, this doesn’t matter because there won’t be a pulp mill. Is it any wonder their supporters are confused and Green support is fading? It doesn’t help that the confuser is blaming the confused.
Does TAP want to protect Tasmania’s native forests from logging and if so, what alternative do you propose to forest agreement?
The method and scale of native forest logging in Tasmania is a crime against the planet. We have allowed to be liquidated much of the rare cool temperate forest supposedly held in trust for future generations.
But the notion that monoculture tree plantations are the answer is wrong-headed in the extreme. Plantations have been an economic, social and environmental disaster.
TAP, as a member of FSC Australia, favours whole of catchment management and selective forestry on a scale in keeping with properly established criteria of sustainability.
There are many areas of Tasmania that should never have been logged and should never be logged. What do you call an agreement with which very few people agree?
[Bob McMahon will speak at the Climate Change Social Change activist conference in Melbourne over September 30 to October 3.]
• Forest contractors cry foul over compensation $1m cap proposed
BY DINAH ARNDT CHIEF POLITICAL
26 Sep, 2011 12:00 AM
FOREST contractors have slammed a Commonwealth proposal to cap their compensation at $1 million a business claiming it will short- change some by millions of dollars.
Under the $276 million state- federal forestry deal, $45 million was set aside to compensate those contractors put out of work due to timber company Gunns Ltd exiting native forests.
However, while Gunns received $23 million under the agreement signed on August 14 and Forest Tasmania $11.5 million - not a single dollar has been handed to contractors.
Tasmanian Forest Contractors Association chief executive Ed Vincent said last night he was informed late last Friday that the Commonwealth was planning to cap compensation for individuals at $1 million - against industry wishes.
“The (federal Forestry) minister (Joe Ludwig) has failed to recognise that there is a big range of business sizes within the forest contractors sector ... and that there are 10 to 12 contractors who will now go into bankruptcy because of this process.
“We are now calling on the Prime Minister to intervene in this whole sorry mess,” he said.
Mr Vincent said the industry had argued that compensation be calculated based on the volume of material that was harvested or hauled by contractors.
“It’s something of a breach of faith that contractors impacted by this whole process should be treated inadequately and inequitably,” he said.
“The minister asked us to be involved so this process was without controversy and we have done all we can to ensure that is the case.”
A spokeswoman for Senator Ludwig confirmed the suggested $1 million cap last night.
“The Government remains concerned to ensure that contractors assistance is available to the largest possible number of contractors including sub- contractors,” she said.
“The Government has written to the TFCA suggesting a cap of $1 million dollars per applicant.
“Everyone knows contractors are doing it tough. This cap seeks to get the balance right between assisting as many contractors and sub- contractors as possible.
“We have been working closely and constructively with the TFCA and we look forward to receiving a response from them.”
Premier Lara Giddings could not explain the delay in compensation payouts yesterday, saying it was a matter for the Commonwealth.
• Code Green, Huon Valley Environment Centre, Still Wild Still Threatened: Groups Gather Statewide in Support of Remanded Protestor Ali Alishah.
Members of Code Green, Huon Valley Environment Centre and Still Wild Still Threatened will gather across the state tomorrow in a support vigil for incarcerated protestor Ali Alishah. The vigils will be held at Civic Square in Launceston and Parliament lawns in Hobart at 12.30pm.
Mr Alishah faces court for a trespass charge tomorrow after spending three weeks in remand on peaceful protest charges. The groups aim to show support for Ali and the campaign for immediate protection of 572,000ha of native forest and the immediate intervention in the construction of Gunns Ltd’s Tamar Valley Pulp Mill.
• FORESTRY CONTRACTORS BUYOUT MUST BE EQUITABLE
Must Assist Industry Participants Stump-to-Mill
Kim Booth MP
Greens Forestry Spokesman
The Tasmanian Greens are concerned to ensure that not only head forestry contractors receive payouts under the Federal Government’s criteria for industry compensation, but all businesses which have collapsed as a result of the industry downturn.
Greens Forestry spokesperson Kim Booth MP said compensation must also flow to subcontractors including tree fellers and supporting industries such as mechanics and tyre suppliers.
Mr Booth said the Greens would be writing to the Prime Minister and Federal Minister Ludwig to raise these concerns.
“The last assistance package administered by Mr Ludwig’s office was rorted and maladministered, seeing many eligible contractors miss out whilst others who appeared not to meet the criteria received hefty payouts.”
“The result last time was that 72 contractors were deemed to comply with the criteria but only 30 received funding, and we need to ensure the same mistake does not happen again,” Mr Booth said.
“The package should go from the stump to the mills and include tree-fellers mechanics, sub-contractors and sub-contractors.”
“The Greens want the eligibility criteria finalised as soon as possible. However that doesn’t mean that the Federal Government should rush through a second-rate, inequitable deal that leaves some contractors out in the cold,” Mr Booth said.
First published: 2011-09-26 03:57 AM