Statement by the Chief Executive of FEA, Mr Andrew White
The Chief Executive Officer of Forest Enterprises Australia (FEA), Mr Andrew White today confirmed the company remained in discussions with its financiers over its restructuring plan and financing arrangements.
The Company requested a suspension of its shares last Friday pending the outcome of these negotiations.
Mr White said that the plan for asset realisation FEA presented provides the best opportunity for the Company to repay the majority of its current bank debt and pave the way for a return to profitability as the markets for its core businesses improve over time.
FEA has current debts of approximately $216 million through loan facilities of around $235 million with its two financiers. These facilities, maturing in January 2011, are backed by assets of over $500 million. FEA is not currently seeking increased facilities from its financiers, but rather ongoing support from its financiers and their patience to allow it to greatly reduce its banking debt through unlocking value from its quality assets.
“Primarily as a result of the recent global financial crisis (GFC), the Australian forestry and forest products industry has experienced challenging trading conditions for timber products, wood-fibre and forestry investments which has already resulted in some company failures in the forestry investments sector and this has unfortunately created uncertainty for financiers about the entire forestry and forest products industry,” said Mr White.
“However, over the past 12 months, FEA has undergone an integrated corporate restructure in order to benefit from the market recovering in the future, with plans for reduced debt secured over our significant suite of assets.
“FEA undertook a significant and successful capital raising last year and, coupled with the commencement of an orderly asset sales program, this has enabled us to start the process to reduce debt and strengthen our balance sheet. Our plans for asset sales have been consistently presented to the market in our Investor Presentations.
“We believe we have presented a rational, realistic and workable plan that will enable us to effectively reduce our current debt. The Board of FEA and I are concerned for the future of our employees, shareholders, forestry investors and the regional communities that rely on plantation forestry if the financiers further reject the Company’s plans.
“For over 15 years now, successive Australian and State Governments on both sides of the political divide have supported what is known as the Plantation 2020 Vision for Australia.
“FEA has contributed significantly towards this vision, which specifically aims to reduce Australia’s dependence on imported timber and woods products providing regional employment security and sound environmental benefits. Further loss of confidence in the plantation sector and a decrease of private sector funding for plantation establishment should be of immediate critical concern for the Australian Government and all the regions in Australia that rely on plantation forestry.
“We have been encouraged in recent days by the receipt of strong support from the Tasmanian Labor Government and the Liberal opposition.
“The Tasmanian State Government was immediately responsive when we contacted them seeking assistance with our restructuring plan.
“We will continue to work closely with the Government to seek a solution that preserves the value that FEA delivers to the State.
“FEA has played a key role in developing a high quality Australian plantation resource over the last 25 years, reducing our reliance on native forest timber and creating significant employment and revenue in downstream timber processing.
“Together with our management team and Board of Directors, we will do everything within our power to ensure that the company and our industry continue to have a sound future,” concluded Mr White.
ENDS