Received 23/10/2009UPDATE 1. Sale of Trees to Global Forest...

Received 23/10/2009

UPDATE



1. Sale of Trees to Global Forest Partners



As you are aware by now the Timbercorp Forestry assets including your trees have been sold to Global Forest Partners (GFP) subject to FIRB approval. If approved, the sale is due to settle on or around 4 November. To ensure that you are aware of the break up of the offer made as far as your trees are concerned I advise that the GFP bid for the trees was as follows:



Offer by bidder $197.7m



Less: Est KM fees $ 3.0m

Rents to 31/10 $ 10.0m

---------------

$184.7m

========



The above offer of $197.7m includes approximately $172.7m cash and $25.5m secured over the Boort Olive Grove assets. As such we will not convert this security to cash unless and until the Boort Olive Grove assets are sold. The security, as advised by KM, is a fixed and floating charge over the assets including the land, the permanent water rights, infrastructure and the processing plant. The issue that I think we will have to deal with at some time in the future is the apportionment of sale proceeds from the Boort Olive Grove assets as between us as security holder and the olive growers. This same issue is soon to be the subject of litigation between the banks and the almond growers affected by the sale of assets by KM to Olam. It is important to note that we opposed the transfer of the security from CBA to the growers in court in front of Justice Pagone. Justice Pagone's decision was swift and permitted the CBA security to be transferred despite our objections. CBA's motivation in this was clear. it was to avoid a fight with the olive growers on the apportionment of any sale proceeds. Instead, the CBA have pitted the eucalypts growers against the olive growers. For our response to the judgement and CBA's action there was an article in the Australian around the 1st October.



Another issue that has arisen and could jeopardise the amount that some growers may receive is termination of the head lease by one of the landlords for non payment of rent. The landlord is a company called Plantation Land Limited (PLL). It is believed that the owners of PLL include some of the former officeholders of Timbercorp Ltd. The allocation for 1998 to 2002 project investors could be reduced significantly if PLL's assertion as to ownership of the trees is upheld in court and could cost growers in those projects somewhere between $20m to $24m. I will refer to this PLL legal action again later in this email.





Working on $195m as an allocation due to rounding differences on numbers provided by KM I have estimated that the estimated proceeds would be as follows:



Project Year
Estimated Number of Growers
Estimated Number of Planted Hectares
Estimated Number of lots per Hectare
Allocation of Proceeds by Bidder
Estimated Allocation per woodlot

1998
1,703
16,334
16,334
$ 45,000,000.00
$ 2,754.99

1999
3,253
28,958
28,958
$ 83,300,000.00
$ 2,876.58

2000
1,189
10,323
10,323
$ 25,400,000.00
$ 2,460.53

2001
529
4,112
4,112
$ 11,600,000.00
$ 2,821.01

2002
520
3,567
3,567
$ 5,700,000.00
$ 1,597.98

2003
541
5,791
5,791
$ 4,700,000.00
$ 811.60

2004
1,035
5,904
5,904
$ 8,200,000.00
$ 1,388.89

2005
2,420
11,582
11,582
$ 9,400,000.00
$ 811.60

2007/2008
1,967
12,326
12,326
$ -
$ -

Timbercorp owned



$ 1,700,000.00







Please note that these are very crude estimates as there was no information available to state the number of lots for each year. In a conference call with Korda Mentha, KM advised the Committee of Inspection that their figures were approximately $700 to $1,000 higher than those set out above. As such, I am not holding out that these figures are accurate but rather they were prepared as a means of trying to understand what the $197.7m meant on a woodlot/timberlot basis for growers.



2. Plantation Land Ltd - Termination of Head Lease



As mentioned above, PLL terminated the leases with Timbercorp and are now asserting that they own the trees on their land. It has been suggested by a number of parties that the land owned by PLL is some of the best land used by Timbercorp to grow the eucalypts and, as such, has some of the best trees. KM have attempted on at least two ocassions to pay the rents since the notice of termination was issued. PLL have returned the cheques on both ocassions. The issue as to who owns the trees will now be decided in court. The case itself was initially due to be heard last week but was adjourned to 27/28 October due to PLL's legal team not lodging defences and affidavits within sufficient time to allow ABL or Clarendons to respond prior to the original hearing date (14/15 October).



Since the adjournment we have been advised by our legal representatives that PLL would like to discuss the matter and are open to an out of court settlement. Any potential out of court settlement will be subject to our legal advice. The legal advice that we are receiving at present and the legal advice that KM are receiving suggests that we have an extremely strong case. The issue that must be weighed up is whether or not we want to fight this action. Best case scenario is that we win. However, a win still means we pay interest and possibly all of PLL’s costs but we retain ownership of the trees. Worst case is that we lose, have to fund PLL and our costs and we lose up to $24m from the sale proceeds. We are in constant communication with our solicitors and we will take whatever action is consdiered appropriate given the two outcomes mentioned above.



3. Timing of Payments by KM to Growers



I had a meeting with Mark Korda of KM approximately 10 days ago. We discussed the timing of the distributions to growers. Mark Korda advised that KM will look to make the first distribution prior to Christmas and this will be in the vicinity of $100m. Once everything has been reconciled, the PLL siutation known and we have recovered the proceeds from our security off the Boort Olive Grove assets KM should be in a position to make the final distribution.



4. Fighting Fund



We have been receiving a number of requests to for invoices and refunds on the belief that the growers have been "charged' an amount and that all actions have been completed. In respect to invoices, we are not issuing invoices as the money received was a voluntary contribution to a fighting fund. In respect to refunds I advise that our work is not yet complete and we are still incurring legal costs as we speak on the PLL matter. Once the PLL matter is resolved one way or another we then may have to fund an action regarding the apportionment of the sale proceeds from the Boort Olive Grove assets where we are the secured creditor owed $25.5m. Hence, we are not issuing refunds at present. Once all actions and costs have been covered, if there is money remaining we will then look at reimbursing those funds remaining to the parties that made contributions. Any refund will be pro rated on a percentage of unused funds to total funds collected. If the amount is deemed too low to refund, the money will be donated to a charity. This information will be confirmed in a latter email.



I should also point out that we have saved significant amounts of money through Bourne + Weir not charging for the administration of the bank account or my time which has been considerable over approximately 3.5 months (and is still on going). Further, we did not spend money on obtaining independent expert opinions regarding the valuation of the trees in the various projects as: GFP provided an allocation in their bid, we reviewed the valuation numbers and modelling used by TC Growers and we were given access to independent research reports used by another bidder. This saved us somewhere in the vicinity of $25,000.



We have transferred $50,000 of the fighting fund to Clarendons to cover legals to date on the PLL case. Some of this may be refunded if an out of court settlement is reached.



5. Thank You



Many people have been involved in the process and have given significant amounts of their time and effort on your behalf and have done so without payment. In addition, there has also been the TC Growers consortium that brought us together and assisted in having a body that was able to represent you and were the only ones in the market that tried to assist the growers. Hence, on your behalf I would like to thank the following people and acknowledge their efforts:



- John Roche for all his time and effort in co-ordinating the GRG in each state, providing us with updates and guidance. Without TC Growers we would have been unorganised and ineffective. With TC Growers support we did have a voice and, in the end, KM were dealing solely with us rather than with TGG or the Committee of Inspection. Based on the other projects, this was a large feather in our collective cap.



- Matt Kirk who worked behind the scenes to arrange conference calls for GRG members around the country, circulating emails and correspondence and maintain the website.



- David Sharpe from the Melbourne GRG who has been a significant contributor and someone whom I have been able to rely upon for advice and guidance at crucial decision times. David has also had a great deal of input in respect to the legal aspects.



- Michael Hawkins from the Perth GRG who has been able to provide significant input in respect to legal issues that have arisen throughout the process



- All GRG Members throughout Australia who took time out of their busy lives to try and make a difference on your behalf.



When you start thanking people you inevitably overlook someone. To avoid this I would thank all those who contributed to the process.



Regards,

Tom Weir (for the GRG)