Forestry company Gunns has entered administration after being abandoned by its lenders, with more than $1.2bn of losses in two years, the collapse could result in up to 600 job losses, affecting the Tasmanian economy.
The company’s main lender, ANZ Banking, appointed KordaMentha as receivers and PPB Advisory has been brought in by the company as administrator following unsuccessful restructuring efforts.
The group collapsed under the weight of its debt, with bankers unwilling to stump up any more cash or time. Gunns had been suffering from the global downturn in paper demand, however financial analysts were pointing the finger at former CEO John Gay as the architect of the group’s downfall. Gay was ousted from his role in 2010 by shareholders, and is due in a Tasmanian court next week on charges on insider trading relating to $3.1m worth of shares.
It is reported a syndicate of lenders led by ANZ was owed $340m by Gunns as of January this year, while the company’s total debts were $526m as of June 30.
Gunns has spent much of the past decade planning a controversial $2.3bn pulp mill on Tasmania, which was fiercely opposed by environmentalists, but supported by the union movement, and which caused much political backstabbing in the island state.
The company’s sawmills and timber distribution business will continue to operate, while plantations may be sold, however there will be a strategic review of the pulp mill.
Gunns’ reported net losses of $904m in 2011/12 and $356m in 2010/11 after posting an after tax profit of $28.5m in 2009/10, Gunns shares have been suspended since March when they were worth 16 cents, having been $3.56 five years ago.
The construction, forestry, mining and energy union (CFMEU) said it will fight for the entitlements of Gunns workers who lose their jobs.
Andrew Tribute
