Gunns directors face scrutiny
Creditors voted on Tuesday to liquidate the company and appointed administrator PPB Advisory as liquidator.
The administrator's report, released last week, raised concerns about how the company was trading before its collapse in September last year, suggesting Gunns could have been insolvent six months earlier.
"The liquidator can look to recover transactions against management for knowingly trading the company while insolvent," PPB's Daniel Bryant said.
Former directors of Gunns have previously denied the company traded while insolvent.
Mr Bryant said a report would be filed with the Australian Securities and Investments Commission within three months, addressing the issues of concern.
"What we would need to do as liquidators was establish a sound commercial case to recover for the benefit of the stakeholders," he said. "We'd only do that in terms of an avenue for recovery if we were of the view that we could get a material benefit for creditors."
Mr Bryant reiterated receivers KordaMentha's view that unsecured creditors were unlikely to see any of the hundreds of millions of dollars they are owed.
Gunns has debts of about $3 billion, including $446 million owed to secured lenders who are also unlikely to be paid in full. Workers' entitlements of $10 million, however, would be met, he said.
Creditors leaving the 2½-hour meeting held across the road from Gunns' derelict former head office in Launceston expressed dismay.
"You set up your life so that you have a reasonable retirement and something like this happens and then you're in limbo," timber grower Pauline Chitty said.
More than 300 farmers who grew timber for Gunns are caught up in the collapse.
"The repercussions probably will be what happens to the trees, the land, the future of the plantations in the state, which are right round the farming community," farmer David Gatenby said.
Growing trees to supply the $2 billion pulp mill Gunns proposed is one possibility, with KordaMentha looking to sell the permit for the project, which faces an ongoing legal challenge.
Opponents of the mill have warned Gunns' major secured creditor, ANZ, against pursuing the project.
"If ANZ takes any steps that support the construction of a pulp mill in the Tamar Valley, the alliance will campaign vigorously against ANZ at a higher level than has occurred in the past," No Pulp Mill Alliance's Lucy Landon-Lane said.
Frequently Asked Questions about this Article…
Creditors voted to liquidate Tasmanian timber company Gunns and appointed administrator PPB Advisory as liquidator after the company collapsed. An administrator's report raised concerns that Gunns may have been trading while insolvent as early as six months before its collapse in September, prompting the decision to liquidate.
Yes. The liquidator has said it will widen its investigation into the company's collapse to decide whether former directors should be pursued. PPB Advisory noted it can seek to recover transactions if management knowingly traded while insolvent, and it plans to file a report with the Australian Securities and Investments Commission (ASIC) within three months addressing these concerns.
A liquidator investigation can lead to legal action to recover assets for creditors if there is a sound commercial case. For everyday investors who are unsecured creditors, the liquidator and receivers have warned that recoveries may be limited, so outcomes often depend on whether pursuing directors or assets can produce a material benefit for creditors.
Gunns had about $3 billion of debt, including roughly $446 million owed to secured lenders. Receivers and the liquidator indicated unsecured creditors are unlikely to recover much of the hundreds of millions they are owed, and even secured lenders are unlikely to be paid in full.
The liquidator said workers' entitlements of about $10 million would be met. However, more than 300 timber growers who supplied Gunns are caught up in the collapse and expressed concern about being left in limbo; the article indicates many growers and unpaid suppliers may face uncertain recoveries.
KordaMentha, the receivers, are looking to sell the permit for Gunns' proposed $2 billion pulp mill. The project faces an ongoing legal challenge and opposition groups have warned major secured creditor ANZ against supporting construction, arguing any bank involvement could prompt public campaigns against it.
Potentially, yes — selling the pulp mill permit is one avenue receivers are exploring to realise value from assets. But the permit faces legal challenges and strong public opposition, and receivers will only pursue sales or recoveries if they believe there is a sound commercial case that produces a material benefit for creditors.
Local timber growers and farmers expressed dismay about the collapse, worrying about the future of plantations, the fate of trees and land, and their retirement incomes. More than 300 growers who supplied Gunns are directly affected, and uncertainty remains over what will happen to plantations and supply arrangements as administrators and receivers seek to realise assets.
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