Timbercorp warns its future is uncertain

Agribusiness investment manager Timbercorp has warned the market that there is a significant risk the company may fold under the weight of its debt troubles.

The group has been trying to activate an asset sale program that it hoped would allow it to repay debt and continue to fund the business in the future. But this asset sale program, announced with the group’s annual results in November last year, has hit troubled waters.

In a statement to the Australian Securities Exchange yesterday, Timbercorp said it had received non-binding indicative offers for its forestry assets from a number of parties. But the manager said the offers were at values “substantially below book value” and were incomplete and conditional in nature.

Timbercorp said it would continue to try to implement the asset sale, but the group has warned that unless its lenders agree to extend its loan facilities or it can come up with an alternative refunding or restructure program by May 1 this year, there is “significant uncertainty regarding the ability of the company to continue as a going concern”.

Timbercorp has syndicated and bilateral loan facilities of more than $562 million that is due to be repaid at various stages between the May 1 this year and August 2011, with the majority of these payments due in the next 15 months.

Of most pressing concern is a $200 million syndicated loan facility, of which a payment of $20.5 million is due on May 1 this year — a deadline that has already been extended by one month.

Of that $200 million the group must also pay $5 million on June 1, $15 million in July and November and $50 million in December, with a final repayment in December next year.

But whether or not the company will make it past its initial May 1 deadline is the key question.

The group is now in discussions with its financiers in an attempt to renegotiate its debt facilities with a view to extending and amending its existing facilities. The group said it is also working on a number of alternative funding and restructuring options it hopes will allow it raise additional cash to reduce debt and fund operations.

But in the absence of a successful asset sale program, the group remains reliant on its funders for existence.

If the group can navigate through the coming months, it will also have to repay more than $104 million in bilateral facilities this year, more than $108 million next year and $150 million in 2011.