MORE than 18,000 private investors and leading Australian banks are expected to be affected by the demise of debt-ridden agribusiness group Timbercorp, which has gone into voluntary administration.
The administrators - Mark Korda and Leanne Chesser of KordaMentha - have ordered the suspension of Timbercorp's forestry and horticulture operations while they sort out funding options.
They aim to develop strategies for each project.
The company manages about 120,000 hectares of forestry and horticultural assets on behalf of 18,500 investors who since 1992 have invested some $2 billion in Timbercorp projects through managed investment schemes.
In such schemes, investors buy a wood or horticulture product on an allotment of land and claim the amount as a tax deduction.
KordaMentha is expected to have a big job because much of Timbercorp's land and massive water rights are held in independent ASX-listed trusts.
The company also has joint ventures with leading businesses such as the award-winning olive company Boundary Bend, almond producer Select Harvests and fruit and vegetable businessman Frank Costa.
The head of the Australian Plantation Products and Paper Industry Council, Richard Stanton, said Timbercorp's demise should not change the fundamentals of the company's forestry investments.
"The trees are owned by individual investors, but could be managed by someone else.
"The investors should still get a return," he said.
For the year to November 2008, Timbercorp reported current debt of $568 million, net debt of $903.1 million and net assets of $595 million.
ANZ, Westpac, Commonwealth Bank and BOS International are lenders to Timbercorp.
An ANZ spokesman said the bank had "appropriately provided for its exposure to Timbercorp."
"As usual, we will be discussing group provision levels at our interim results on April 29," he said.
Mr Korda said the company had been hit by the combined impact of tightening credit, the economic downturn and drought.
Timbercorp's share price has been in free fall for months and was trading at 4c when suspended from the ASX after the company announced the voluntary administration.
Timbercorp has struggled since the Tax Office ruled last financial year that investors in non-forestry managed investment schemes could not claim a tax deduction for their contributions.
Timbercorp won an appeal against the ruling in the Federal Court last December, but investors had deserted the group.
The company announced late last year that it would sell forestry land and horticulture assets to repay debt, but failed to sell any assets.
Austock analyst Craig Stranger said Timbercorp had taken on too many assets and not turned them over.
"They were kept on the balance sheet but they should have been selling them over the past 18 months,'' he said.
Timbercorp's assets on balance sheet totalled $1.7 billion.
Mr Stranger said the Federal Government's tax changes to horticulture MIS had caught the company off guard.
The MIS model of corporate finance was fine, "but it could have been done better".
Timbercorp's projects generated $360 million in revenue - mostly from annuity earnings - which translated into $80 to $90 million in earnings.
Much of this was chewed up by paying off debt, he said.
Mr Stranger said Great Southern had escaped a similar fate to that of Timbercorp, by putting in place a scheme 12 months ago that gave project investors equity in the company.
They thus gained a stake in the cash flow, he said.
"But they (Great Southern) are not out of the woods yet."
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