Falling woodchip prices fell Gunns
- Gunns shot down as talks collapse
- Background: jobs or trees trade-off
- Timeline of the demise of Gunns
It's a great day for environmentalists but a very ugly moment for the shareholders and bankers who have funded the controversial forestry business Gunns.
It officially put itself into the hands of an administrator today but in a practical sense has been trading courtesy of its bankers for a while.
Gunns has run out of money. Photo: Penny Stephens
And the bankers have allowed this to continue because they were hoping that Gunns could raise some equity to build a pulp mill that environmentalists had been fighting against for years.
Certainly the green movement had a significant long-term impact on the company's financial future but then so did a long list of factors, including poor management decisions and more recently the high Australian dollar.
The situation might have dragged on even longer but for a fall in woodchip prices that pushed the teetering company over the edge.
Even if the Bell Bay Pulp Mill had found backers there was no clear path for the company to restore profitability.
Meanwhile, a syndicate of lenders led by ANZ is owed a massive $560 million and was not prepared to support it any longer.
These lenders had put insolvency experts, KordaMentha into the company last month to assess the situation and clearly the report card had not been good.
For investors there was no escape - the shares have been suspended for months.
In August, Gunns released a frightening company update. Its asset values were being written down by up to $800 million - land, plantations, the managed investment schemes and the money already spent to build the pulp mill that will now never operate.
That accounted for more than the value of the company's net assets. In other words after accounting for debt, the company had negative assets of minus $50 million to minus $150 million.
The recasting of the value of the assets was in part due to the fall in the price of woodchips but also because in previous accounts, the asset values reflected a pulp mill project that would go ahead.
With the value of today's hindsight, this accounting treatment seems to have been wide of the mark.
It is eight years since the pulp mill was proposed - and it's taken that long to get final regulatory and political approvals - to say nothing of financing.
Despite these obstacles it was only in the 2012 year that the mill didn't meet the "probable to proceed" criteria.