good to see gunns in trouble, page-16

PS:

This GNS’s $175m “divestment� is so complex that no wonder not many people understand it.

This “divestment� is to “sell� the young trees first and then to “buy� them back when they are mature. So in essence, it is like a mortgage – GNS mortgages the young trees for a $175m loan first and then pays the loan off plus interest at the end – but the interest will be much higher than normal due to complexity.

So why GNS didn’t make this “divestment� an explicitly “loan�/�debt� arrangement?

The only purpose I could imagine was to avoid the word “debt�/�loan� deliberately, otherwise GNS might breach its loan covenants. So this also reveals what a financial situation GNS is in.