by: Andrew White From:The Australian October 04, 201212:00AM
INVESTORS in the managed investment schemes run by collapsed timber group Gunns are mounting a challenge to the appointment of voluntary administrators PPB Advisory, in a bid to protect their interests in hundreds of millions of dollars of timber plantings.
The investors -- known as growers -- claim PPB is conflicted in its role as voluntary administrator of both the forestry group and of Gunns Plantations, which ran the MIS business containing 21 timber, almond and grape projects in Tasmania and on the mainland on behalf of an estimated 40,000 individual investor/growers.
The push to change administrators is the first move in what is expected to a complex process of resolving the schemes, with investors already running class actions against collapsed scheme operators including Great Southern, Timbercorp, Willmott Forests, Rewards Projects and FEA Plantations over alleged disclosure failings. Investors in later schemes, where the trees are further from maturity, are most at risk of suffering losses, according to class action lawyer Ron Willemsen of M+K Lawyers.
The Great Southern Growers Group is circulating a letter hoping to gather proxies from growers to back its push to have PPB Advisory removed as administrator of the Gunns Plantations business and install BRI Ferriers instead at the first creditors meeting next week.
In the letter, the growers argue that PPB is conflicted because it is often retained by the banks to act in other matters, and was nominated by lenders in the collapse of Willmott Forests, "from which growers are likely to receive little or no return".
The growers said that in the Willmott administration, PPB applied to the court to cancel leases on the land where crops were to be grown, despite growers having pre-paid leases or being due to make payments out of harvest proceeds.
"The administrators of plantations have obligations to growers which are likely to conflict with their obligations to other creditors of Gunns," the group said in its letters.
"PPB is presently the administrator of both companies and is therefore in a position where a possible conflict may arise." PPB declined to comment but has pushed back the date for the first creditors meeting -- where the firm's appointment will be voted on -- to next Wednesday.
Gunns collapsed on September 25 after banks refused to allow the company to keep the proceeds of asset sales for running costs and directors appointed PPB as voluntary administrators. Ten lenders led by ANZ bank-appointed Korda Mentha as receivers over 36 companies, including Gunns Plantations, to recover around $400m in senior loans ahead of any claims by other creditors represented by PPB.
KordaMentha principal Mark Korda has already indicated that Gunns shareholders are likely to get nothing in the wind up. The receivers are attempting to sell two timber mills and assess interest in the Bell Bay pulp mill for which Gunns had permits but no financing to build.
The receivers and administrators will also have to make assessments about 21 separate MIS schemes where Gunns was the responsible entity, including nine schemes launched between 1998
and 2006 and sold to Gunns following the collapse of Great Southern in 2009.
Sources said untangling the claims would be complicated because, depending on the scheme, Gunns could be an investor, financier, manager and customer of any of the plantations.
In its results for the year to June 30, Gunns wrote off $206 million from the value of its interest in MIS schemes and provided another $19m against a book of loans it provided to finance investors in the scheme. Gunns said the value of its interest in the Tasmanian MIS was negative $101m, meaning the cost to the company in funding the leasing and management of the plantations was greater than the value of expected proceeds.
Mr Willemsen, a principal with M+K Lawyers -- which has grower class actions afoot in three other cases -- said the growers' chances of receiving anything from the administration was likely to depend on when the trees were planted.
Less-established plantations would take longer and cost more money to bring to harvest, and might be wound up prematurely, Mr Willemsen said.
But growers might still be pursued to repay loans taken out to fund their initial interest, even if the scheme was to be wound up and harvest proceeds not recovered.
"The lenders (to the schemes) are attempting to justify themselves by suggesting that investors only made their investments to obtain an immediate tax deduction," Mr Willemsen said.
"The fact is the investors expected to pay income tax on the proceeds from harvest at the completion of the schemes. The recent projects will never get to that point because the responsible entities were not sufficiently strong financially to see the projects through."
He said the collapse again highlighted potential shortcomings in disclosures by the MIS operators about the risks to investors if the company collapsed
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