FEA Growers

This website is an information resource for grower investors in the 16 managed investment schemes for which FEA Plantations Limited is the Responsible Entity.

GREEN ALERT ABOUT FEA:

Commonwealth Bank of Australia Limited (CBA) is responding to queries from stakeholders expressing concern about its role in forcing Forest Enterprises Australia Limited (FEA) into so-called “Voluntary Administration” with a short statement that is also being distributed by Colonial First State.  

To learn about what the Commonwealth Bank didn’t say to its “valued clients” click here.

The Australia and New Zealand Banking Group Limited (ANZ) has also responded to stakeholder queries. To view their response click here.

STATUS UPDATE

On 13 May 2010, BRI Ferrier issued a CIRCULAR TO CREDITORS regarding the Second Meetings of Creditors of Forest Enterprises Australia Limited and FEA Plantations Limited. To view this circular click here.

On 30 April, the Federal Court granted an extension period for a decision on inter-Group leases on the basis that the judge considered that the leases contained clauses (Clauses 16 and 17) providing 6 months before the Lessor can terminate internal inter-Group Leases. The extension period for these leases was subsequently extended to 30 June 2010. To read the Reasons for Judgement click here. 

The BRI Ferrier CIRCULAR TO CREDITORS advises that the latest date on which the Second Meetings of Creditors can be held is 20 September 2010. At these meetings, BRI Ferrier will report to Creditors under Section 439A of the Corporations Act and provide a recommendation to Creditors regarding the future of the Companies.

The Circular also advises how Creditors will be given Notices of the Meetings.

To access a list of Frequently Asked Questions for Grower Investors click here.

There is another website with some information about FEA Growers. It also has links to Growers involved in the collapses of Timbercorp and Great Southern. To access this website, click on the link www.feagg.com.au

MAKE YOUR FEELINGS KNOWN

There have been many messages of support  - and many expressing serious reservations about the treatment of the FEA Group of Companies - received via this website.

We strongly encourage all Creditors and other interested parties to make their feelings about the FEA Group of Companies widely known.

We have prepared a list of people and organisations you may wish to contact by phone, mail or email. To access that list, a list of questions in response to the ANZ response, and a sample letter prepared by a grower click here.

Outcomes of First Meetings of Creditors of Forest Enterprises Australia Limited and FEA Plantations Limited

Tuesday 27, April 2010 – Albert Hall Convention Centre, Launceston 

To access the minutes of the FEA meeting click here

To access the minutes of the FEAP meeting click here 

Approximately 100 people attended the first meeting of creditors held for Forest Enterprises Australia Limited (FEA) and its wholly-owned subsidiary FEA Plantations Limited.

The purpose of the meetings was to provide an opportunity to creditors to remove the board appointed administrators replacing them with an alternate administrator, and appoint creditors committees.  BRI Ferrier was appointed as Voluntary Administrators of both companies on 14 April 2010. 

On 14 April 2010, the group’s financiers, the Commonwealth Bank and the ANZ Bank, also appointed Deloitte as Receiver and Manager to FEA, but not FEA Plantations.

Brian Silvia of BRI Ferrier addressed both meetings.  He reported that Deloitte had sought to terminate the management agreement between FEA and FEA Plantations, which provided for work on the plantations by FEA on behalf of 13,000 growers. He advised that Deloitte had subsequently sought that FEA employees have continued access to the plantations for the purpose of conducting forestry management work. 

FEA Plantations’ ability to carry out works on behalf of growers is impacted by the charges held by the banks.  He advised that the banks view is that any monies received by FEA Plantations should be paid across to the banks with the resulting effect being that there could be no money to maintain the plantations.

Monthly rent for plantation land owned by the FEA group has been paid through an internal accounting transaction of an estimated $1.3 million paid by FEA Plantations to FEA, but Silvia advised there exists a range of mitigating circumstances including an offer from FEA to provide FEA Plantations with up to $5.5 million per month to cover any short fall in funding requirements.  In addition, rent in advance of around $4.5 million is due on third party leases on 1 July.  

Silvia said that the Commonwealth Bank and the ANZ are now claiming their debt to be about $223 million, with the increase from $216 million probably linked to costs and a change in interest arrangements on part of the loan facility.

Deloitte has advised BRI Ferrier of its intention to market the properties as soon as possible and, in the process, determine the grower interests based on the NPV of the timber.  Silvia stated that this could disadvantage growers in later schemes with newly planted trees. He advised that the lowest possible level the growers could receive is only $100 million based on a very conservative NPV calculation .

NPV calculations for forestry assets are based on variables including timber prices, product segregation, plantation growth rates and market opportunities and depend upon what NPV value used. However, it is understood that FEA’s internal calculations are closer to $1 billion of likely returns in current dollars to be paid to growers based on past experience, its knowledge of the timber markets and the strong growth rates of the projects. This difference demonstrates the value in keeping the schemes operating to fruition.

BRI Ferrier indicated it would closely examine the history of the banks actions and current position with respect to the change from a negative pledge to the security sought by the banks around May 2009 when Timbercorp and Great Southern collapsed. They would also look at the range of opportunities to deal with the group’s assets including the restructure of projects and refinancing the group.

Silvia also brought to light the mistake whereby the Commonwealth Bank and ANZ erroneously took charge over growers’ assets in various schemes, and the unwillingness of the banks to rectify their error.  He stated that this was a topic of considerable communication between FEA Plantations and the financiers over the past year.  The banks frustrated FEA Plantation’s considerable efforts to correct the matter and, to date, have refused to sign a deed of rectification but this Deed nevertheless, was signed by the FEA Plantation Board and forwarded to the banks.  Silvia advised the meetings that FEA Plantations had reported the matter to ASIC. BRI Ferrier has advised that it has also been in discussions regarding the matter with ASIC and it is understood to be of concern to ASIC. 

Silvia also revealed another startling development.  Although the growers’ harvesting proceeds were placed in a Custodian Account by FEA Plantations for the protection of the growers, Silvia advised the meeting that the Commonwealth Bank and ANZ instructed BRI Ferrier not to deal with these monies, which would involve paying them to growers, despite them being payable.

FEA Plantations is owed $1.2 million by growers for plantation insurance it paid in advance on behalf of growers in October last year, and $7.5 million will soon be payable by growers for ongoing annual fees mainly in earlier projects. In terms of inter-company loans, FEA also owes FEA Plantations around $1.8 million.

The FEA Group had total equity of about $279 million at the end of February 2010 principally made up of land, the Bell Bay sawmill and the loan book to Growers, allowing for nearly $38m in impairment or write downs against the land and about $11 for depreciation and amortisation of the loan book.  The net trading loss for the 8 months to February 2010 was expected to be around $5m. It is understood that this amount approximates the bank inspired costs incurred by FEA for accounting, legal advice and extra bank fees and costs for this period.

Silvia also flagged the bank’s treatment of the capital raising that provided a net $37.5m to FEA. The Commonwealth Bank and the ANZ refused access to a significant portion of this capital over the past months, forcing the company into administration after the banks also refused FEA access to all its operating cashflow.

The creditors were told of significant third party interest expressed to the Administrators, with two groups interested in largely eliminating the bank debt for the purpose of FEA continuing as an ongoing concern and the schemes operating on a restructured basis. It is believed that both the Commonwealth Bank and the ANZ were aware that FEA was negotiating with at least one of these significant parties prior to the banks leaving FEA Directors no option than to appoint administrators.  

The FEA Plantation’s creditors meeting saw the bank’s seek a resolution to replace BRI Ferriers as the administrator with Korda Mentha, which was overwhelmingly lost after the banks solicitor called for a poll resulting in 2,875 proxies supporting BRI Ferrier and only 5 proxies for Korda Mentha.

The bank’s motion suffered a similarly embarrassing loss at the FEA creditors meeting.   The poll challenge resulted in 2,689 proxies supporting BRI Ferrier and only 3 proxies supporting Korda Mentha. 

Mark Korda and Mark Mentha of Korda Mentha are the administrators for Timbercorp.  Mark Korda had advised the FEA plantations creditors meetings that he believed the banks would make money available to fund Korda Mentha’s administration fees.

More information about FEA can be obtained from www.fealtd.com or the BRI Ferrier First Report to Creditors. This is available by clicking here 

Investor and Creditor enquiries: fea@briferriernsw.com.au 1300 229 266