Securinvest Financial Planners

As you would be aware, the Creditors Meeting for Great Southern and its related companies was held last week on Thursday 19th November in Melbourne.

At the meeting, it was voted to liquidate 27 of the 35 companies that make up the Great Southern group. The fate of the remaining 8 companies will be decided at a meeting in Perth in the coming weeks.

The fact that Great Southern has gone into liquidation does not affect the viability of a majority of the underlying schemes. The problem is that Great Southern had considerable borrowings with both the Commonwealth and ANZ Bank and the land that the majority of the forestry projects were planted on owned by Great Southern could now be sold by the banks to recover their outstanding debt.

There was very little mention at the meeting in regards to the various projects with the exception that:

1. the receivers had struck an initial deal with Gunns (see below) in relation to the timber plantations and that they would be calling a growers meeting later this year.
2. proposals are still being negotiated in regards to all of the olive projects.
3. one proposal is still being pursued in regard to the High Value Timber projects
4. proposals in regard to the 2004 & two 2005 Vineyard projects are being pursued; the prospects for the 2006, 2007, & 2008 Vineyard projects are bleak.
5. a proposal for the Almond projects is being pursued

Subsequent to the Creditors meeting, late Friday afternoon, many of you may have received a release from Gunns which outlines an initial ‘Implementation Agreement’ with Great Southern which covers off a proposal by Gunns to replace Great Southern as a responsible entity of the 1998 – 2006 forestry schemes. They continue to investigate the 2007 schemes and may make a proposal at a later date. There is no word on the 2008 forestry schemes at this stage.

Under the proposal, Gunns as the new responsible entity would receive a percentage of the 1998 – 2006 Pulpwood schemes’ Net Harvest Proceeds when the timber is harvested. The percentage varies by scheme and ranges between a total of 4.5% and 55.0% of Net Harvest Proceeds. Details and percentages are outlined in their communication

http://www.gunns.com.au/Content/uploads/documents/ASX Releases2009/2009 11 20 ASX Release - Gunns Proposes to Manage Great Southern Plantations for Investors.pdf

A growers meeting to vote on resolutions relating to the proposal is proposed to be held on 23 December 2009. This is definitely a positive outcome and demonstrates that there remains value in the assets held by investors. It is also with interest to note that ANZ Bank has a close relationship with Gunn’s and by assisting Gunn’s in any funding arrangements that might be required to take over the administration of the Great Southern assets will help protect any exposure that ANZ Bank might have!

In addition to taking on the role as responsible entity, Gunns has substantially agreed to, (but not yet finalised or signed), an asset sale agreement to acquire certain forestry assets of the Great Southern group for approximately $8.7 million. The assets comprise property, plant and equipment, water licenses, inventory and insurance payment receivables. We are unsure of what is meant by this and if the insurance payments that may have been received to date will continue to fund the insurance of the underlying assets.

In relation to insurance and separate to the Creditors meeting, many of you may have received an initial offer from Agricola Crop Insurance to insure your trees. A small number of you may have then received a follow up letter to say you cannot insure them and your premiums will be returned. This ‘confusion’ from their part is due to the land owner of these projects claiming the assets planted on their land (the trees) to recover outstanding rental payments. There are a very small number of investors that this applies to and I suspect the sale of the trees to recover the overdue rent will not occur without a long and drawn out legal battle.

For those who have not received the second letter from Agricola and may have been waiting to see what did transpire at the Creditors Meeting, our advice is to seriously consider the offer to insure your woodlots. With last weeks dry conditions, a number of fires in plantation forests last week and with summer fast approaching, this insurance could be a wise investment.

It is obvious that things are staring to transpire at a rapid rate. We will endeavor to communicate as soon as we hear of anything which will impact your investment and encourage you to regularly check the this website. As always please feel free to contact our office on 03 9574 8300 if you have any queries.