PIS, AFS draw battlelines with banks amid FEA fallout

A battle for the hearts and minds of agribusiness managed investment scheme (MIS) investors has been raging following Forest Enterprises Australia’s (FEA’s) entry into administration and receivership.

Dealer groups with funds invested with FEA, including Professional Investment Services (PIS) and Australian Financial Services Group (AFS), support the line taken by FEA that a resolution to its financial woes was close and that the removal of funding support by the Commonwealth Bank of Australia (CBA) and ANZ was malicious and unwarranted. CBA, meanwhile, rejects that a viable restructure plan had been produced.

PIS was FEA’s biggest supporter and also has a minority shareholding in the listed company. AFS was also a strong supporter of FEA’s MIS business.

One of the ironies of PIS being critical of the CBA’s role in the company’s demise is that just weeks before FEA’s entry into administration, PIS announced it would not support any agribusiness MISs, including FEA’s, for the 2009-10 financial year.

PIS pointed to financial concerns regarding FEA as one of two factors for its decision. The removal of a significant percentage of FEA’s inflows into its MIS projects this year is unlikely to have helped FEA’s argument with its bankers.

A positioning statement is in circulation describing FEA’s history and its entry into administration. Its title: ‘The

rise and fall of Forest Enterprises Australia, a very sad story of a great Tasmanian company brought undone by callous international and so-called Australian banks’, sets the tone for the four-page document.

The author of the document is Barry Chipman from forestry lobbyist group Timber Communities Australia, however, it appears to have been at least circulated through FEA’s offices.

The writer argues that CBA and ANZ must “explain why their changed view of the timber investment industry has resulted in their decimation of the sector”. It describes FEA as the latest victim of an international financial crisis borne of and exacerbated by the banking industry.

The document is available on the FEA Growers website — a site created to represent the interests of MIS investors. The site also points to recent media articles outlining the growing dominance of Australian banks.

In a written statement, CBA said it had been “extremely disappointing” that the chairman of FEA had “sought to pass the blame for the company’s financial problems and the appointment of voluntary administrators onto the banks”.

“Financiers have provided ongoing support for many months to give the directors time to ascertain the ongoing future of the company and attempt to develop a restructure plan. Even current FEA forecasts disclose continued significant cash operating deficits and, more importantly, no fundamental restructuring changes to FEA’s operating model,” the CBA statement said.