Slow, lingering death for iconic company

THE once-mighty Tasmanian timber company Gunns was not meant to die.

For 141 years, it had been an integral part of its community, operating as a successful family business that grew into a public company in the top 100 in Australia.

The plan was that the proposed $3 billion Bell Bay pulp mill would be the company's next big milestone, transforming Gunns into an internationally competitive downstream processor as well as a major woodchips exporter.

But 2012 was instead the year of Gunns' demise.

It had been a slow, lingering death.

It took the company's last managing director, Greg L'Estrange, and the Gunns  board until September to call in administrators.

They had been given a couple of days to make the move themselves rather than the call to wind up the company being made for them by Gunns' major lenders, led by the ANZ Bank.

The lenders had already decided that they would not extend the company's credit to keep its ailing operation afloat.

But as early as March financial commentators had started to say  publicly what many had been muttering privately for some time about the demise of the once proud Launceston-based company.

The decision by the Singapore-based Richard Chandler Corporation to back out of a potential investment in Gunns was the first big blow in 2012 that set the company on its final path.

Mr L'Estrange - in one of his rare public statements - called on Tasmanians to share his outrage at what he believed were the reasons for the Chandler Group pulling its potential investment.

That investment would have helped clear Gunns' debt and set it up to start the pulp mill.

Mr L'Estrange said that there was a direct correlation between meetings that Chandler Corporation executives had with Tasmanian Greens politicians in Hobart the week before and the corporation's decision to pull out of its dealings with Gunns.

He said that he had spoken to Mr Chandler, who had assured him that the decision had not been made around the economics  of Gunns.

Anti-pulp mill campaigner Lucy Landon-Lane said that she believed the opposite was true - that the Chandler Corporation had investigated Gunns' financial situation and decided to pull out.

Gunns sought a two-day trading halt from the Australian Securities Exchange to deal with the fallout. Its shares never returned to trading.

Its shares last traded at 16 - a big fall from their peak price of $4.45 in January 2005, before Gunns' acquisition of Auspine and the battle for the proposed Bell Bay pulp mill.

For a while after the Chandler Corporation backed out, Gunns toughed it out, working on capital-raising to clear debt and prepare to start on the pulp mill on its own if necessary.

But the negotiations that Mr L'Estrange claimed were close to being finalised when the administrators were called in all came to nought.

A required report by Gunns to the Australian Securities and Investments Commission late last month provided the first detailed figures on the size of Gunns' debt and how its collapse would affect the community.

It is unlikely that any of Gunns' 857 unsecured creditors who are owed more than $70 million will be paid anything.

The list also revealed that the company had paid very few of its bills for at least 12 months.

 As the year closed, former Gunns  executive chairman John Gay waited for his day in court early in the new year to answer insider trading allegations.

Both Mr L'Estrange and Gunns chairman Chris Newman have resigned.

Gunns' administrator  Melbourne-based PPB Advisory  is preparing  for its second creditors' meeting in late January, and it will report back   on what the likely payout from the wind-up will be.

It is also preparing to move what remains of the company from its purpose-built Lindsay Street headquarters to make way for giant hardware retailer Bunnings, which has bought the site.

Gunns  receiver KordaMentha, acting on behalf of the main lending institutions, announced the sale of the company's timber products assets in the week before Christmas.

It will now focus on preparing for the sale of the proposed pulp mill project and its site early in the new year.

Gunns creditors and former employees meet to discuss the demise of the forestry giant.

Gunns creditors and former employees meet to discuss the demise of the forestry giant.


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