Gunns 'had' solvency concerns
In a detailed report to creditors, PPB Advisory says Gunns directors may have misused harvest proceeds owing to the "growers" investors in its managed investment schemes, worth up to $11.2 million, as well as $27.6 million in sale proceeds from its Green Triangle estate, and another $1.2 million in grower premiums owed to insurer Agricola.
Gunns may have had solvency concerns six months before it entered administration on September 25 last year.
"As we are yet to form a conclusive view on the date of insolvency we are unable to state definitively whether the Gunns Group traded whilst insolvent," the report said.
"Additional investigations will be required by a liquidator (if appointed) before a view may be formed."
The administrators' "preliminary view" is that Gunns was insolvent from "at least" September 21.
But the report says solvency concerns could have existed when prospective partner in the company's proposed northern Tasmanian pulp mill, the Chandler Corporation, pulled out in March 2012.
PPB says there were also concerns in July, when Gunns announced it was relying on the support of lenders, and September 12 when lenders knocked back a request for funding.
The report concludes Gunns has debts of about $3 billion and recommends the company be liquidated.
It says lenders owed $446 million are unlikely to be paid in full and unsecured creditors owed $2.4 billion will not see any return.
Workers' entitlements totalling $10 million will be met, the report says. A second meeting of creditors in Launceston next Tuesday will determine whether the company should be wound up.
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PPB Advisory, the receivers, told creditors that the directors of failed Tasmanian exporter Gunns should be investigated for potential breaches, including insolvent trading and possible misuse of third‑party monies to fund the company's operations.
The report says Gunns may have misused harvest proceeds owing to "growers" in its managed investment schemes (up to $11.2 million), $27.6 million in sale proceeds from its Green Triangle estate, and about $1.2 million in grower premiums owed to insurer Agricola.
Gunns entered administration on September 25 (last year). Administrators' preliminary view is that Gunns was insolvent from at least September 21, and PPB says solvency concerns may have existed earlier — for example when the Chandler Corporation pulled out of the proposed pulp mill in March 2012, and during lender problems in July and on September 12.
PPB concludes Gunns has debts of about $3 billion and recommends the company be liquidated. The report also says further investigations would be required by a liquidator (if appointed) before definitive findings can be made about insolvency timing or director breaches.
According to the report, lenders owed about $446 million are unlikely to be paid in full, unsecured creditors owed roughly $2.4 billion are unlikely to receive any return, and workers' entitlements totaling about $10 million will be met.
PPB says the directors should be investigated for potential breaches including insolvent trading and misuse of third‑party monies. However, the receivers also note they have not formed a conclusive view on the date of insolvency and that a liquidator would need to carry out additional investigations.
A second creditors' meeting in Launceston will decide whether to wind up the company. Investors and growers should expect further reports and investigations if a liquidator is appointed, and to follow creditor meeting outcomes for updates on recoveries.
The report raises concerns that grower proceeds and premiums (totalling up to the amounts cited) may have been misused. Given the recommendation to liquidate and the scale of unsecured claims, growers who are unsecured creditors may face limited or no recovery, pending further investigation and liquidator outcomes.
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