Gunns top brass aren't tipping in their own moneySMH David...

Gunns top brass aren't tipping in their own money
SMH David Symons
October 5, 2010


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After a few shaky months, news from the timber giant Gunns has been brighter of late. Aggressive buying from Phil Mathews' hedge fund has help lift the share price out of the cellar, and the company's 2010 financial statements hint that construction of the long-delayed $1.4 billion Bell Bay pulp mill could start this year.

But, despite the positive headlines, it seems Gunns insiders are increasingly nervous about the company's future. When it comes to their own hard-earned, they are not keen to be unsecured creditors of the company they work for.

This is showing through in dwindling balances in an unsecured note scheme that allows Gunns executives to deposit cash with the company, presumably with an interest rate a little better than a bank deposit. The unsecured notes rank behind more than $500 million of bank debt.

Gunn's annual financial statements break out the unsecured note balances, with the last three annual reports telling the story of a product whose popularity has faded with Gunns's declining fortunes.

In June 2008, when Gunns's health was relatively robust, the scheme held $7.8 million. Since then it's been one-way traffic. By June 2009 a number of depositors had headed for the exits and the scheme held $4.8 million.

Despite Gunns's success in freeing up $70 million through the sale of wine, hardware and surplus land assets this year, and with the company remaining on good terms with its lender at the ANZ Bank, Gunns's board and management are increasingly sceptical.

By June 2010 the scheme balance was less than $3 million.

It is Gunns's top brass that are leading the charge. By June 2010 the directors had just $135,191 on deposit, down from $1.75 million a year earlier.

The company's senior executives are also fleeing the unsecured note scheme - their holdings were down about 60 per cent for the year.

Notably, Gunns's chief executive, Greg L'Estrange, whose base pay is set to double to $1 million in 2011, keeps his cash somewhere other than the unsecured notes.