Gunns runs out of credit

FAILED timber company Gunns directors could still face charges of trading insolvently and have their personal financial positions examined.

Gunns administrator PPB Advisory has informed creditors in a premeeting report that it sees merit in public examination of possible insolvent trading by the company and potential breaches of directors' duties.

It will recommend to creditors at their second meeting next Tuesday, March 5, that they vote for all Gunns companies to be placed into liquidation.

PPB Advisory told creditors in the first detailed report of the company's financial position since being wound up, obtained by The Examiner, that it had not continued to examine the possibility of insolvent trading because there was not enough money to pay for the investigation.

"In the event that the creditors resolve to place the Gunns group into liquidation, the liquidators shall continue investigations into any personal liability that the directors may have and consider whether it is necessary to seek statements of financial positions to be completed," the report says.

The extensive 75-page report accompanied by 68 pages of attachments shows the full extent of the former Tasmanian timber giant's collapse, speculated on for nearly 12 months before an administrator, receiver and manager were appointed late last year.

PPB Advisory's preliminary view is that the Gunns group was insolvent from at least September 21 last year.

But it says that Gunns may have had solvency concerns from as early as March last year when equity partner Richard Chandler Corporation withdrew its proposal.

The administrator has continued investigating that the Gunns parent company might have improperly used third party funds for managed investment schemes for day-to- day operation expenses.

PPB has found that:

•- It is unlikely that there will be sufficient funds to satisfy the company's lenders' debt of about $446 million.

•- The receiver estimates that employee priority claims will be met in full from circulating asset realisations, but the timing of any payments is uncertain.

•- Unsecured creditor claims stand about $2.4 billion. The receiver estimates that realisation of assets under its control will be insufficient to produce any return to ordinary unsecured creditors.

•- There are 48,984 growers with original investments totalling about $1.6 billion across all schemes - their investment depends on securing a new scheme manager or the short-term harvest and/or sale of scheme assets.

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