forest enterprises talks to its bankers

http://www.theaustralian.com.au/business/forest-enterprises-talks-to-its-bankers/story-e6frg8zx-1225835373135

Forest Enterprises talks to its bankers

* Rebecca Urban
* From: The Australian
* March 01, 2010 12:00AM

THE future of Forest Enterprises Australia appears to be in doubt, with the company spending the weekend locked in negotiations with its bankers in a bid to resolve issues relating to its loan facilities.

The Tasmanian forestry group revealed on Friday that it had breached two of the financial covenants relating to its performance during the previous calendar year, prompting it to provide a certificate of default to its financiers.

It requested that its shares be suspended from trading on Friday so discussions with its lenders could continue.

A spokesman for the company, which owes about $240 million to the Commonwealth Bank and ANZ, declined to comment yesterday.

Forest Enterprises, which owns a state-of-the-art $72m timber mill and woodfibre processing facility in Bell Bay, had been attempting for several months to renegotiate the financial covenants that apply to its debt. When the New Years' Eve deadline passed with no agreement, the company received a temporary waiver.

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The new deadline expired on Friday.

The company said a restructuring plan was submitted to the banks on January 29, but the plan was rejected.

Shares in the company have come under increasing pressure over recent months, partly as a result of the high-profile collapse of rival agribusiness players Great Southern and Timbercorp.

Forest Enterprises reported a $14m loss last financial year as new sales from its managed forestry investments slumped on higher than expected operating costs associated with its new sawmill. It has yet to release its results for the six months to December 31.

The company's largest shareholders include Elders and Gunns, which recently reported a surprise 98 per cent drop in interim profit to $420,000 and announced a strategic review of its operations.