Another forestry company collapses

ASX-listed forestry company Forest Enterprises has been forced into administration by its lenders, Commonwealth Bank and ANZ, as the Australian forestry sector continues to fight for survival.

Forest Enterprises chairman Will Edwards told the ASX in a statement yesterday that the company was left with little choice to call in administrators after the banks informed the company that the proceeds of any asset sale would need to be placed “into a separate bank account for the sole benefit of the Banks”.

“This has placed the board in an untenable position as it prevents the ability of the company to access the necessary funds to operate its normal business activities. As such, the board has no option but to place the company in voluntary administration.”

Like many companies in the sector, Forest Enterprises has been hit by a double blow from the collapse of the managed investment scheme industry (which brought down companies such as Timbercorp and Great Southern Plantations) and the global financial crisis, which hurt demand for wood products.

FEA has been in the process of seeking refinancing and restructuring options – including the sale of land to third parties – but the banks have clearly run out of patience.

“Although the company had received non-binding letters of intent that support a due diligence and negotiation process for these transactions, the company has not been able to negotiate a sufficient period of time from its banks to enable these transactions to be progressed to a more definite stage,” Edwards said.

Earlier this year, Forest Enterprises approached the Tasmanian Government in an attempt to secure financial assistance, but this request was denied last month.

In early March the company said it had debts of about $216 million through loan facilities of around $235 million with CBA and ANZ. The company said these facilities were backed by assets of over $500 million, although recovering that value is likely to be a tough job for administrators BRI Ferrier given the state of the industry.

Forest Enterprises’ major shareholders include agribusiness giants Gunns and Elders.