Timbercorp administrators recommend wind-up
Timbercorp administrators Korda Mentha is recommending the group be wound up because it is insolvent.
In its recommendation to the second creditor’s meeting to be held later this month, the administrator said it was not in creditors' interest to cease the administration and return the group back to the directors.
“It is possible that the creditors may consider ending the administration and returning the group to the control of the existing directors,” the report said.
“This is not a commercial proposition given the group has little to no cash to enable a restructure or maintain operations on a going concern basis.”
According to accounts prepared by Korda Mentha, the Timbercorp group was trading at a $5.6 million loss for the year on April 23, the day it went into administration.
This compared to a $41.6 million profit at September 30 the previous year.
The problems stemmed from the year’s revenue falling from $494.4 million at September 30 to $217.8 million on the day of administration.
According to the administrator, Timbercorp ran into difficulties due to its decision not to offer managed investment scheme (MIS) products this financial year.
“It is noted that in the 2008 financial year, the annual revenue for the issuance of new MIS products was nearly $120 million,” the report said.
The loss of confidence in the MIS sector had resulted in a growing number of defaults in both project and loan payments from late last year.
The administrators also believed the drought and the global downturn had affected commodity prices, especially the demand for woodchips from Japanese trading houses.
The inability to sell the group's forestry business, land and some horticultural assets also led to the decline in Timbercorp’s financial position.
Korda Mentha has looked at whether Timbercorp was trading while insolvent, but due to time constraints has not been able to determine the actual point the company became insolvent.
The report states all land leases had been paid to June 30 and creditors were being paid in a reasonable time.
Due to the complexity of the group, Korda Mentha admitted it needed more time to investigate a number of areas of the company’s financial state at the time of the administration.
If Korda Mentha is appointed liquidator at the creditor's meeting on June 29, it will have time to investigate the operation of the group further.
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