afr article 31 AugustGUNNS NET LOSSES BALLOONGunns has squeezed...

afr article 31 August

GUNNS NET LOSSES BALLOON

Gunns has squeezed out its messy full year results on the last day of the month with net losses ballooning to over $900 million while the timber company continues to seek further support from in lenders in a bid to stay alive.

Tasmainian-based Gunns repeated comments made earlier this month pointing to poor operating conditions in the woodchip market which has forced the company to significantly write down the carrying value of its forestry assets by nearly $750 million.

Gunns said late Friday night in addition to the impairment charges the company has reduced the carrying value of timber processing assets held for sale by nearly $44 million.

The full year net loss of $904 million in fiscal 2012 compares to a net loss of $355 million the prior year. Underlying earnings reached just $26 million in the year to June 30.

Gunns remains in talks with its lending syndicate of 10 banks, lead by ANZ. The company also said it continues discussions with possible investors in the company. However, insolvensy firm KordaMentha has just finished its final health report on Gunns and handed it over to the banks which may mean Gunns days are numbered unless the lenders agree to give it a waiver.

Gunns announced Wednesday that its hybrid holders would have their investments converted into shares. The conversion expanded the number of shares on issue by 60 per cent, but crucially ensured that the hybrid investors lost their priority claim ahead of existing equity investors over the company’s assets, should the company be wound down.

The company issued 1.2 million “FORESTs” hybrids at a price of $100 in 2005 and they were valued at $45 when trading was suspended in March.

Assuming the stock exchange assigns the same value to the business as it did when share trading was suspended in March, Gunns’ stock should fall from 16¢ to 10¢ per share to reflect the dilution.

However, senior lenders are worried that the value of the company’s assets may result in them not recovering their money, and there may be little left of Gunns for equity holders to claim.

Gunns has ramped up talks again with Credit Suisse over a hail mary capital raising.