Australia’s tax-driven Managed Investment Schemes sector has collapsed with the final big player, Willmott Forests, falling over owing around $120 million to its banks.
It also owes around $400 million to around 8,000 investors.
On August 31, the last day of the June 30 reporting period Willmott Forests made a three paragraph statement to the ASX.
"On 5 July 2010, Willmott Forests Limited (ASX: WFL) (“the Company”) announced that the Board and management of Willmott Forests were undertaking actions to address challenges for the Company arising from a lower than expected level of FY2010 sales. The Company requested and was granted a suspension of its securities from official quotation by the ASX to enable sufficient time to complete a detailed review of the business.
"The Board and senior management of Willmott Forests continue to work diligently through the review process which includes development of a comprehensive capital management plan for consideration by the Company’s financiers.
"Willmott Forests will inform the market of the review outcomes when it is completed and intends to lodge its Preliminary Final Report for the year ended 30 June 2010 at that time."
The shares were trading at 32c when suspended at the end of August. That valued the company at $46 million.
Those shares are now worthless after the company yesterday revealed the result of that review: collapse with receiver managers being appointed.
That means the company will be broken up and sold off, with investors in both the listed shares and the Managed Investment Schemes losing heavily.
Willmott said in yesterday’s statement:
"The Board of Willmott Forests Limited (Receivers and Managers Appointed) (“the Company”) wishes to advise shareholders that the Company’s financiers, Commonwealth Bank of Australia and St George Bank (“the Syndicate”) have today appointed Mark Mentha and Bryan Webster of Korda Mentha as joint and several Receivers and Managers of the Company under the provisions of the Syndicated Facility Agreement.
"The Directors are of a view that the action of the Syndicate has created sufficient uncertainty around the Company’s financial position to warrant the appointment of an Administrator to ensure an orderly administration of Willmott Forests and its creditors.
"Since early July 2010 the Company has been engaged in an ongoing detailed review of the business and a comprehensive business plan was presented to the Syndicate with the objective of repaying the syndicate debt in full.
"Debt repayment was to be realised through the sale of land assets and immediately actioned reductions in direct operating costs. Advisor appointments were made and key work streams allocated.
"During this period the Syndicate granted the Company temporary waivers of compliance with certain provisions of the Syndicated Facility Agreement.
Progression of the business plan was dependent on the finalisation of negotiations to establish a new debt facility.
"The Syndicate has today advised Willmott Forests that the temporary waiver is terminated and that all loans are immediately due and payable."
About 8000 investors have pumped $400 million into the company’s forestry investment schemes.
Willmott’s failure all but wipes out the MIS sector, already badly damaged by the bigger failures of in the last two years of Timbercorp, Great Southern, Environinvest and FEA.
The collapses of Great Southern and Timbercorp were especially damaging, given that they were the major players in the timber segment, which was the biggest of the MIS schemes.
Mr Korda said Willmott’s business model had a fundamental flaw in that it relied almost entirely on future MIS sales.
”Willmott Forests experienced a decline in new MIS sales from $66.5 million in 2008-09 to $19.5 million in 2009-10,” Mr Korda said in a statement.
”This severely hampered cash flow, particularly when the Willmott schemes did not require annual maintenance or rental payments from growers.”
And in better news, Australia’s major rare earths group, Lynas Corporation saw its shares surge yesterday after it announced a substantial increase in the mineral resource estimate for its Mount Weld project near Laverton in Western Australia.
Lynas shares ended up 16.5c, or more than 15%, at $1.24, with more than 47.8 million shares in the company changing hands.
With China, the world’s major supplier, again cutting its supply of rare earths into the world market in the past month, Lynas has emerged as a company of interest to major global investors.
The federal government last year blocked a Chinese attempt to buy control of the company.
Rare earths are used in products liked Ipods, glass, lasers, camera lens, batteries in hybrid cars like the Prius, computer memories, high grade steel used in wind turbines and a host of new technologies.
The Sydney-based company said the combined rare earths mineral resource estimate for Mount Weld had increased to 17.49 million tonnes at 8.1% rare earths oxides (REO), giving
