bonds, page-2

Look I am no expert and the more this goes along the worse the situation seems. However by looking at the 2008 AFS they state:

"Unlisted finance bonds – The Timbercorp Limited Finance Bond Prospectus was opened in October 2004 and closed in November 2005 after issuing $25.885 million Class A and Class B, Finance Bonds. The bonds are backed by grower investor loans. Class A bonds paid interest at 8.25% per annum and were repaid on 31 March 2008. Class B bonds pay interest at 8.75% per annum and expire 31 March 2010. The bonds have a face value of $100 each. There are nil (2007: 167,410) Class A Bonds and 91,440 (2006: 91,440) Class B Bonds on issue."

So essentially your investment was backed by the growers debts owing on MIS investments they made and probably yearly fees they owed TIM for managing the assets.

In reality what I read into the announcements is that whilst they may have debtors in the form of growers who owe them money these are no longer all good and as such there may or in fact if you read the announcements literally the bonds no longer have $100 backing as some of these have gone bad.

I am no expert but what worries me is that TIM had an obligation to the growers so they have a claim as TIM cannot fulfil these duties as Responsible entity and get these projects to completion.

AYT had similar backed loans to GTP and they recently made this announcement:

"AYT has invested in a securitisation program that has exposure to investor loans backed by Great Southern MIS
• AMF is of the view that an increase in the number of borrowers contesting their loan obligations has contributed to increased arrears and expected future losses"

So I would expect the same result in TIM. People who owe this money have (in their opinion) no longer got the asset as the whole shooting match is in administration or liquidation.

My feeling is that there is also a cost of managing this debt and collecting it so all those costs also get charged to this. There mst be in the prospectus the name of the trustee who had responsibility for looking after your interests. You should contact them but I am sure they are going to be vague as no-one yet knows the outcomes but what we do know is that the administrators , liquidators and attorneys are all taking fees each month.

My personal view is that this type of security is vastly inferior to a mortgage bond or security over physical assets. Debtors require management and need to feel that its in their interests to keep paying. If I was one of them I would stop paying and wait for a letter of demand and then see if I could come to a settlement figure but I wouldn't pay it all. So I think there is more to come but I think you need to expect a significant capital loss.

I have no connection to TIM but hold some TODHA which is a Debenture covered by property and moveables. For this reason I have been keeping a watching brief over the events.

Hope this helps.