forester debt plan still a problem

From Mercury Tasmania


March 04, 2010 12:01am

TROUBLED timber processor and plantation company Forest Enterprises Australia is still at loggerheads with financiers despite putting forward a plan to sell assets.

Chief executive Andrew White said yesterday: "The Board of FEA and I are concerned for the future of our employees, shareholders, forestry investors and the regional communities that rely on plantation forestry if the financiers further reject the company's plans."

FEA, whose shares are suspended, has breached banking covenants and banks rejected a previous proposal by it in January.

FEA wants to sell assets to repay part of a $216 million bank debt, and return to profitability.

Its debt is in loan facilities of about $235 million with two financiers and matures in 2011.

The company's market capitalisation has dropped to about $20 million.

Assets include a timber mill at Bell Bay processing Eco Ash and Bass Pine branded timber, and 73,000ha of plantations.

"FEA is not seeking increased facilities from financiers but ongoing support and patience to allow it to reduce debt through unlocking value from assets," he said.

"As a result of the global financial crisis, the forestry and forest products industry has experienced challenging conditions."

The timber industry downturn resulted in the collapse of Great Southern Limited and Timbercorp and contributed to a 98 per cent drop in half-year profit recorded by Gunns Limited.

Mr White said he had been encouraged by strong support from the State Government and Liberal opposition.