Gunns rejects Gt Southern scheme

Thousands of Great Southern investors are facing substantial losses after forestry heavyweight Gunns opted against resurrecting the 2007 timber scheme.

The decision comes less than three weeks after Gunns secured support from investors to take over nine defunct Great Southern schemes, dating from 1998 to 2006.

Gunns confirmed to WA Business News that it would not seek control of the 2007 scheme, citing a lack of economic viability.

About 4,000 investors deposited $122 million into the project.

The Tasmanian company is likely to come under criticism from 2007 scheme investors - many of whom also invested in earlier schemes - for not making its intention known before the meeting as that could have impacted their vote.

Two rival bids, headed by local industrialist Gordon Martin and forestry veteran Tony Jack, expressed a desire to take on the 2007 scheme but had not launched a proposal for it at the time of the Gunns meeting.

The Gunns position at the time of the December 23 meeting was that it intended to investigate the feasibility of taking on the 2007 project. Facing the possibility of having their projects wound up, investors supported the Gunns proposal to take over the management of the 1998 to 2006 projects.

It is generally accepted that it is easier to make money from the earlier schemes, as the trees are closer to harvest.

There will be widespread repercussions to the Gunns decision as many investors took out loans and owe repayments to lenders such as Bendigo and Adelaide Bank, and no longer have an asset.

Great Southern operated 45 forestry, horticulture and cattle managed investment schemes on behalf of 43,000 investors, however the bulk of money, investors and public interest, is in the flagship timber schemes.

It is understood McGrathNicol will now move to have the scheme wound up, leaving investors with a fraction of what could have been retrieved if the trees had been brought to harvest.

Other investors in the schemes who were randomly allocated lots on third party leases - as opposed to Great Southern-owned land - face a complete write-off of their investment after the leases were breached during the collapse.

The sole remaining timber scheme, the 2008 project, is almost certain to be wound up.