14/04/2010 - 12:52

Forest Enterprises in administration

14/04/2010 - 12:52

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Tasmanian company Forest Enterprises Australia has become the third major agribusiness to be placed into administration in the past 12 months, after ANZ and the Commonwealth Bank made a move to recover funds.

Forest Enterprises in administration

Tasmanian company Forest Enterprises Australia has become the third major agribusiness to be placed into administration in the past 12 months, after ANZ and the Commonwealth Bank made a move to recover funds.

FEA owes $216 million to its financiers and has a loan facility capacity from the two banks of up to $235 million.

In a statement to the Australian Securities Exchange today, FEA said the banks had placed the company in an untenable position by blocking access to necessary funds to continue operating.

"As such, the board has no options but to place the company in voluntary administration," FEA said.

The statement follows the companies March statement that is was not seeking increased loan facilities "but rather ongoing support from the financiers and their patience to allow FEA to greatly reduce its banking debt through unlocking value from quality assets".

At the time FEA claimed it had $500 million in assets.

BRI Ferrier has been appointed as administrators of FEA's entities including FEA Plantations, Tasmanian Plantation and FEA Carbon.

Up until today, the company had been in the process of refining a restructure and refinancing plan in a bid to retire debt as well as reduce ongoing operating costs.

In addition, FEA had also been in negotiations with third parties over a major finance raising coupled with a merger with an industry player.

FEA had requested a standstill agreement from lenders on its banking facilities in order to pursue the transaction, however the banks had advised they were not agree to the standstill.

Over the past 18 months, FEA's revenue had been adversely impacted by the gobal financial crisis which affected markets for forestry investment, timber and export woodfibre, FEA chairman Will Edwards said.

The impact of the global financial crisis was recently worsened when major share holder Elders put its 13.5 per cent stake in the business up for sale.

Elders had revised the value of the shares to $5.7 million down from $32.4 million in September 2009, and today wrote down that value to zero.

FEA's fall into administration follow the collapses last year of agribusinesses TimberCorp and Great Southern, which dented investor confidence for managed investment schemes.

 

 

The announcement is below:

 

FEA's financiers, namely the Commonwealth Bank of Australia Ltd (CBA) and the Australia and New Zealand Banking Group Ltd (ANZ) have provided a formal notice, via their Security Trustee, to FEA and relevant FEA guarantor companies. The Banks have elected to take action, relying on the event of default previously advised to the market and as a result, each of the charges granted to the Security Trustee are enforceable and the previous floating charges over all of FEA's assets have converted into fixed charges.

As a result, the Company is now required to deposit the proceeds of realisation of any charged assets into a separate bank account for the sole benefit of the Banks.

This has placed the Board in an untenable position as it prevents the ability of the Company to access the necessary funds to operate its normal business activities. As such, the Board has no option but to place the Company in Voluntary Administration.

As illustrated by regular announcements to the ASX during the first quarter of the 2010 calendar year FEA has been in the process of developing and refining a restructure and refinancing plan with a focus on retirement of debt as well as on-going initiatives to reduce operating costs.

In addition to asset sales, particularly in relation to FEA's land estate, FEA has been negotiating a potential transaction with third parties which, if completed, would have resulted in a restructure of FEA via a major finance raising coupled with a merger with an industry player. Should such a transaction have completed, the Directors' believe that FEA would have stabilised and been in a position to further grow as a major forest and forest products Company. FEA had requested a standstill arrangement on its banking facilities to pursue this transaction.

Although the Company had received non binding letters of intent that support a due diligence and negotiation process for these transactions, the Company has not been able to negotiate a sufficient period of time from its Banks to enable these transactions to be progressed to a more definite stage.

The Banks have now advised the Company that they are not prepared to agree to a standstill.

In announcing the decision to enter voluntary administration FEA's Chairman, Mr Will Edwards, said that the development was an extreme disappointment as the Company, Board and staff who have worked tirelessly to reduce debt and restructure the business to deliver stability to the Company in anticipation of a future recovery by international and domestic timber and forestry investing markets.

After steady growth in profitability over the preceding 6 years, the Company's revenue over the past 18 months has been adversely impacted by the effects of the global financial crisis which impacted on markets for forestry investment, timber and export woodfibre.

The Company advises that the Banks had progressively limited FEA access to its overdraft facilities and also the remaining $12 million of the $39.5 million of capital remaining from the equity raised in October 2009 expressly for working capital purposes, FEA had been to date trading off the proceeds generated mainly from its log trading, timber processing and the revenue from its highly performing loan book.

BRI Ferrier has been appointed as Voluntary Administrators of the following FEA entities:

- Forest Enterprises Australia Limited ACN 009 553 548
- FEA Plantations Limited ACN 035 969 429
- Tasmanian Plantation Pty Ltd ACN 009 560 963
- FEA Carbon Pty Ltd ACN 009 505 195

It is anticipated that the Administrators will make public announcements on the administration process in due course.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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