Great Southern posts loss, sells asset

Agribusiness Great Southern has signed a conditional agreement to sell its Queensland asset for a discounted $23 million as it posts an annual loss of over $64 million.


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Well we all told you beware. If it sounds too good to be true it probably is...

Meantime, Great Southern said it had signed a deal to sell its 26,000 hectare land, of which contains 10,900ha of plantations, to an unnamed international investment timber fund. Under the deal the land will be sold to the international entity and will be leased back to Great Southern for free until completion of the original planned harvest of the relevant plantations. This is just a hedging of their debt. For cash now, the sell off their assets and then are forced to buy them back on the maturity of the timber. As there is 'no such thing as a free lunch', the shareholders are in for a big shock at pay-back time. The plantations themselves on this land do not belong to Great Southern, but to the investors, who have bought them as a tax break. Although the land was bought with the same investment money, it does not belong to these investors. Gunns in Tasmania has just taken a similar action to raise money to pay off their debts, selling timber plantation timber for $170 million, also to an American timber company. This is also a reciprocal deal whereby they will buy it back on maturity. All it does is make their company books look good for the present by getting rid of some of their immediate debt, but this is accumulating for the future and the buy-back price has not been disclosed. With yields consistently not reaching the target figures, this sort of action should, I believe, be closely scrutinised by the shareholders.

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