Timber and management investments group, Timbercorp is facing a questionable future unless it can renegotiate over half a billion dollars of loans to get a better deal from its lenders.
In fact the company has warned that unless it can do a deal with its bankers and other financiers, its future as a going concern is questionable.
The company’s shares were relisted yesterday after being suspended for two days to allow a statement on its position and its debt to be prepared.
They finished down 23.8% (or 2.5 cents) 8 cents.
The securities have fallen more than 40% since last November as it has struggled to survive to credit crunch.
Timbercorp went into a trading halt on Tuesday, April 13, and its securities fell to a low of 7 cents when they resumed trading yesterday.
The company has been trying, unsuccessfully, since last November to sell assets to raise funds to pay down some of the debt and meet repayments.
It seems there were buyers for some of the timber assets, but they were not good enough
It told the ASX yesterday that it is now talking to its financiers to try and fix up a new refinancing deal.
Timbercorp has drawn on $562.9 million of loans from syndicated and bilateral facilities, with payments of $10 million due on May 1, and further repayments due throughout 2009.
Some repayments have already been rescheduled from April to May 1, which now seems to be the deadline for a deal, unless an extension is agreed to by the financiers.
"The Company announced an asset sale program when it released its 2008 full year results on 27 November 2008, Timbercorp said in the statement yesterday.
"The purpose of the asset sale program was to substantially reduce debt and fund the business going forward.
"The Company has now received non-binding indicative offers for the forestry assets from a number of parties following a period of due diligence.
"The offers are at values substantially below book value and are incomplete and conditional in nature.
"The Company is continuing the sale process but, based on the offers received to date it is unlikely that the Company will be able to sell the forestry assets within the timeframe required to satisfy the objectives of the sale program. Indeed, there can be no assurance that a sale will be achieved.
"The Company has also received several expressions of interest regarding the sale of selected horticultural assets.
"However, it is too early in the process to determine whether any formal offer for the horticultural assets will be received by the Company and, if any offer is received, whether the offer will be in a form or at a price capable of acceptance.
"As disclosed in Note 1 to the Financial Statements of the Company for the year ended 30 September 2008 (see page 51 of the Annual Report), the Company restructured its borrowing arrangements so as to obtain waivers for certain bank covenants which would otherwise have been breached as at 30 September 2008.
"The Company undertook to sell selected assets and apply a portion of the proceeds to reduce debt. The revised facility terms matched some of the principal repayments to the expected asset sale program.
"The Financial Statements were prepared on a going concern basis, subject to the asset sale program proceeding as planned or, in the absence of asset sales, the continued support of the Company’s financiers subject to agreeing alternative restructuring solutions acceptable to them.
"Given the status of the forestry sale program, the Company is now in discussions with its financiers with a view to renegotiating, extending and amending its various facilities," The company told the ASX in yesterday’s statement.
"The Company is also working with its advisers on a number of alternative funding and restructuring options aimed at raising additional cash for operations and reducing debt.
"As disclosed in the full year accounts and the Annual Report, in the absence of asset sales, the Company is reliant on the continued support of its financiers.
"Unless the Company is able to reach agreement with its financiers to restructure the existing debt facilities, or an alternative funding or restructure plan is implemented before 1 May 2009, there is significant uncertainty regarding the ability of the Company to continue as a going concern."
Timbercorp was established in 1987 and listed on the stock exchange in 1996.
It has been a pioneer of the tax-driven managed investment sector, which has lost its attractions because of tax law changes in some cases and the credit crunch and fall in profits because of the collapse in the stockmarket and property sectors.
People do not have anywhere near the profits to protect now through tax schemes, if they can access them.
Timbercorp manages large-scale farms across Australia, as managed investment schemes, and has 120,227 hectares of plantations.
It grows and sells almonds, olive oil, citrus, table grapes, mangoes, and avocados, and timber from eucalyptus plantations.
It has 180 employees and is responsible for a further 1500 employees and contractors throughout regional Australia.
According to its website, Timbercorp had assets of $595.6 million in September last year.
