Gunns

Gunns Forest Products (‘GFP’) was Australia’s leading forestry and woodchip export business prior to its collapse in September 2012. Our decision to reinvigorate its export trade links enhanced the value of its significant land and plantation interests and provided new opportunities for Gunns employees and its dormant contractor base. The wider regional economy also benefited significantly from the additional activity that flowed from the reinvigoration of an historically important Tasmanian industry.

Background

GFP employed approximately 100 people across five states and operated a national seed to port value chain delivering export logs and woodchips to the Asian markets.

Due to a global decrease in woodchip demand and a material reduction in export prices between 2009 and 2012, Gunns was unable to meet its ongoing commitments and elected to appoint administrators to all 41 entities within the Gunns group.

Following the appointment of administrators, creditors owed in excess of $400 million appointed KordaMentha as receivers to take control of the forestry operations as a first step in enhancing and recovering the value of a regionally important agricultural enterprise.

How we helped

Our initial assessment of the business determined that in order to maximise the return to creditors we needed to:

• simplify the forest ownership structure to unencumber the productive assets from a complicated legal framework of MIS and various Joint Venture arrangements whilst maintaining the required forestry standards certification
• rebuild the harvest, haulage and wood chipping capabilities required to supply the Asian markets
• revive export sales volumes by repairing the long standing customer relationships that could provide a new future for the business.

Under our plan we:

• negotiated proceed sharing arrangements with the MIS and Joint Venture partners to allow all assets to be sold in a single transaction free from any encumbrances
• increased woodchip production capacity by extending purchase commitments to key contactors, providing certainty of payment and recommissioning a number of production facilities (e.g. seedling nursey and port facilities)
• conducted multiple client sales meetings in key Asian markets to re-establish the business credentials as a reliable supplier of quality woodchips.

Result

A competitive sale process was concluded with the transfer of a going concern forestry business including all employees and operational contracts to a new owner that had the financial capacity to continue the rebuild of the export woodchip business. The going concern sale provided an excellent outcome for the creditors, employees and contractors of the business.