Image for ‘The ‘letter of comfort’ has nothing to do with Forestry Tasmania’s financial performance’

New questions have been raised about Forestry Tasmania’s financial situation, after revelations the Tasmanian Government has again been forced to vouch for its solvency.

In February the Treasurer, Lara Giddings, extended what’s called “a letter of comfort” to the state-owned lender Tascorp, to reassure it Forestry Tasmania was capable of covering its debts.

The reassurance was initially issued in 2009 to allow the two state-owned companies to negotiate new lending arrangements.

Forestry Tasmania’s Bob Gordon told an upper house parliamentary inquiry this afternoon, the occurrence is not unusual.

He was questioned by the independent MLC, Ruth Forest this afternoon.

“So then in your opinion is Forestry Tasmania facing a solvency issue?” she asked.

Mr Gordon replied:

“No, Forestry Tasmania’s trading solvently and will continue to do so and will continue to carry out its normal function.”

Mr Gordon says the ‘letter of comfort’ has nothing to do with Forestry Tasmania’s financial performance.

“The ‘letter of comfort’ was extended without any great debate or negotiation for any issues other than a process one,” he said.

“There was no negotiation about interest coverages or debt to equity ratios or any of the normal things you’d expect to have.”

ABC Online HERE

Tasmanian Times’ forensic commentator John Lawrence has written extensively on Forestry Tasmania’s financial problems and lack of disclosure:
Forestry Tasmania’s cover-up
Insolvency, disclosure and FT. Ruth Forrest’s forensic eye
All John Lawrence: HERE

First published: 2011-05-23 08:02 PM

• Kim Booth:

As Gunns Gets Free Line of Credit From the Public Purse
Kim Booth MP
Greens Forests spokesperson

The Tasmanian Greens today in Parliament, called on the Treasurer, Lara Giddings, to detail why Forestry Tasmania required a ‘letter of comfort’ over its ability to repay loans to TASCORP, given the constant message that Forestry Tasmania is not insolvent and is sustainable.

Greens Forests spokesperson Kim Booth MP asked Treasurer and Premier Giddings whether the debts covered by the letter of comfort were for short term cash flow problems caused by debts owed by customers, or whether Forestry Tasmania’s financial state was such that the letter of comfort would be necessary in any event, for it to remain technically solvent.

“Treasurer Giddings’ failure to explain the nature of the debt gave me no assurances,” Mr Booth said.

“Forestry Tasmania is clearly unable to meet its loan covenants with TASCORP who have rightfully sought what is effectively a third party guarantee for Forestry Tasmania’s debts.”

“But if the debts relate to Gunns’ and others’ inability to pay its debt to Forestry Tasmania, then Forestry Tasmania should have sought a bank guarantee or other security to guarantee that Gunns will pay.”

“It seems that Gunns may be using Forestry Tasmania to provide a free line of credit and the guaranteeing of that debt by the public purse is totally unacceptable.”

“Forestry Tasmania is a rogue organisation that has dined out on the public purse for many years and it is way past time that the umbilical cord was cut and they stood on their own two feet.”

“If Forestry Tasmania’s business model is so hopeless that they cannot pay their bills when they fall due then it is time that they got out of the way.”

“Public money comes from hard earned taxes and should be used for hospital and schools not to prop up mendicant companies such as Forestry Tasmania or Gunns,” Mr Booth said.

• ABC Online: Greens MP accuses Premier of propping up Forestry

• Gunns boss disputes debt claim

ABC Online
25 May 2011

The head of Tasmanian timber company Gunns has denied claims the company owes Forestry Tasmania $35 million.

Claims about Gunns’ debt were raised in State Parliament yesterday.

But Gunns’ managing director, Greg L’Estrange, says the figure is wrong but he would not reveal how much the company does owe.

“We don’t discuss our commercial undertakings in the public domain but that number is not correct,” he said.

Repeal bid

Mr L’Estrange has written to Tasmanian newspapers ahead of debate on a bill aiming to revoke approval of its Tamar Valley pulp mill.

The Tasmanian Greens want to repeal the 2007 Pulp Mill Assessment Act which was fast-tracked through Parliament.

The Greens will lead debate on their Pulp Mill Assessment Repeal Bill during Private Members’ Time this afternoon.

In his letter, Mr L’Estrange says the $2.3 billion pulp mill project will be a credit to Tasmania because of its environmental and economic benefits.

He says whether or not people like it, Gunns has been given its permits by a legitimately elected Parliament and there is growing community support for the project.

“They’re the people that we’re focussed on not a group who we don’t think will ever, for whatever reason, want to change their mind,” he said.

Anti-pulp mill protesters say they will surround Parliament House during the debate, carrying black flags as a sign of mourning for the mill’s approval.

ABC Online HERE

• GUNNS REFUTES OWING $35 MILLION TO FORESTRY TASMANIA
Forestry Tasmania Need to Come Clean and Detail Who Owes It Money
Kim Booth MP
Greens Forests spokesperson

The Tasmanian Greens today called on the Minister for Forestry, Bryan Green, to detail to the House why Gunns CEO, Greg L’Estrange, refuted on radio this morning that the timber giant owes Forestry Tasmania over $35 million, raising the question of just who owes the millions of dollars to Forestry Tasmania.

Greens Forests spokesperson Kim Booth MP said given that publicly owned Forestry Tasmania is playing with public money, its poor track record when it comes to financial management, and given the fact that Treasury have now provided a letter of comfort to Forestry Tasmania’s lenders, it is imperative that the truth was told.

Mr Booth also said that he welcomed the Minister’s undertaking this morning that the outstanding debt is not pulp mill related.

“Gunns’ CEO, Greg L’Estrange, claims they don’t owe Forestry Tasmania $35 million, then that begs the question, how much does Gunns owe, and who owes Forestry Tasmania so much money,” Mr Booth said.

“This publicly owned company has been dining out on the public purse for a long time, has a poor track record with financial management, and now the requirement for a letter of comfort are all factors that should be ringing alarm bells in the Minister that this is now a serious matter.”

“There are many questions that Forestry Tasmania need to answer, like who specifically owes the public company millions of dollars, is interest being charged on overdue accounts, how long will Forestry Tasmania actually need the protection of a letter of comfort?”

“Forestry Tasmania is a rogue agency out of control, it belongs to the public and is way past time Minister Green did his job and directed Forestry Tasmania to reveal the truth rather than letting Forestry Tasmania make him look like a dysfunctional ventriloquist dummy,” Mr Booth said.