This is where I wish I knew more about their MIS and how it...

This is where I wish I knew more about their MIS and how it worked. When I originally bought into TIM, I focussed on their revenue stream with all going as planned. It hasn't gone to plan and now I find myself a bit unprepared in understanding the rest of their business.

One of the services TIM offered was to lend MIS investors the money up front. The investors could also get finance elsewhere but I believe TIM has a loan book in excess of $400m (from memory).

To begin with, I think many MIS investors will have a choice of whether or not they default. They would just do the math of what they had to pay on their loan (pretty high interest rates) and what they expected to get back in return. Without the prospect of paying additional tax, it might make sense to give it up. Of course for some it might not matter at all. If there is no money, there is no money.

Once a person bought a timber MIS, my understanding was that it was developed, or in some cases it was already developed. So I believe there is an asset there up and above the land value and TIM has rights to the income from that land. If the MIS investor’s loan was with a bank instead, the arrangements may be different.

The problem with the timber is that harvest could still be some time away. I think they estimate anywhere from 8-15 years for harvest. I am not sure if the pool timber plots to provide a continuous income like they do with their olives, or if you just have to wait (they do pool timber during harvest for the purpose of averaging across all lots in a given year).

Selling timber in 8 years time will not do you any good if the bank wants money now. So I think it is better in the short term if the MIS investors keep paying, but in the longer term it might be better if TIM has it.

I also don't know if TIM has the option to sell on any repossessed lots or if there would be any tax advantage for an investor to pick one up. Without the tax advantages, these investments are not nearly as attractive but it could really help out TIM.