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Timbercorp subsidiary 'hopelessly insolvent'Ruth Williams
June 4, 2009 .
MORE than 20 olive and almond schemes run by the collapsed managed investment company Timbercorp may be wound up because its administrators found the company responsible for running the schemes was "hopelessly insolvent".

Timbercorp's administrators, KordaMentha, calculated that the almond and olive projects would together need more than $300 million in new capital to operate for another year, and would be cash flow-negative for the next three years, even with the proceeds of this year's harvests.

Timbercorp Securities, the subsidiary designated to operate the schemes and serve as the responsible entity for Timbercorp's 18,500 investors, was insolvent, with no money, no access to money, no staff and "no ability to fund its operations", KordaMentha concluded.

It will apply to the Supreme Court for directions this week, asking whether it should apply to have Timbercorp's 24 almond and olive schemes wound up. The documents are expected to be lodged today.

Any move to wind up the schemes is likely to leave growers with no claim on their assets, apart from some proceeds from current crops.

Timbercorp collapsed with debts of $900 million six weeks ago. Up to 10,000 growers are understood to have invested more than $600 million in the olive and almond schemes over eight years, and many borrowed to buy their investments and to finance their annual fees.

A formal hearing on the potential winding-up of the schemes will take place in coming weeks, which KordaMentha said would provide a forum for growers and interested parties to debate the move.

"We are going to court reluctantly," an administrator, Mark Korda, said. "We have looked at all other options and we think this is the most effective and fairest way to have the debate."

Some growers are calling on the Australian Securities and Investments Commission to appoint a temporary responsible entity for the schemes. A group of investor representatives wrote to the Corporate Law Minister, Nick Sherry, asking for an urgent meeting to put their case. "This action could leave thousands of investors with dead assets and live loans," one said.

KordaMentha would "welcome" a new responsible entity, Mr Korda said, "provided they meet the onerous obligations required by law, and that includes a lot of capital".

The move has no impact on Timbercorp's forestry and non-olive or almond horticulture projects, which are still being assessed by KordaMentha.

Source: The Sydney Morning Herald