SEAS SAPFOR FORESTS PTY LIMITED

IOOF is set to pay tens of millions in compensation after losing an appeal involving its subsidiary Australian Executor Trustees (SA) Limited.

COURTESY OF MONEY MANAGEMENT: In a long-awaited ruling, Australian Executor Trustees is expected to be ordered to pay $80 million in compensation plus costs to victims of the SEAS Sapfor forestry scheme. On 27 September, the Supreme Court of New South Wales ruled in favour of David Kerr in his capacity as additional trustee of the SEAS Sapfor forestry scheme on behalf of the covenant-holders. The SEAS Sapfor scheme invested in timber on behalf of covenant-holders but investors ended up losing the entirety of their investment. (Note: In a judgment in the Supreme Court of NSW, IOOF subsidiary, Australian Executor Trustees (AET), was found to be liable to pay up to $82 million in compensation to thousands of scheme investors after it was found to have breached its duties as trustee of the SEAS Sapfor forestry scheme.)

COURTESY IMF BENTHAM: The genesis of the trouble can be traced to 2008, when Gunns, the Tasmanian forestry group run by controversial businessman John Gay, bought Sapfor and its parent company Auspine in a deal valued at nearly $350 million. The deal would prove costly as the bottom fell out of the woodchip market following the GFC, and Gunns struggled to pay off its debts. In 2010, two years after acquiring Auspine, Gunns granted fixed and floating charge security over all the Sapfor scheme assets to its lender ANZ Bank as a condition for a new loan of $340m. AET was unaware at the time this had occurred, despite the charge being entered on ASIC's public register. As Gunn's cash troubles grew it sought to sell off assets to pay the ANZ back. A buyer from overseas was found for Sapfor, and in March 2012 "“ by which time Gunns' shares had been suspended from trading "“ a deal was signed with Gunns agreeing to sell the trees and land for $39m and AET agreeing to release its encumbrances with immediate effect. AET consented for the money to be paid directly to Gunns' overdraft account, and when only a few months later Gunns went bust the entirety of the scheme's assets, totalling around $55m, were lost to receivers appointed by ANZ Bank.

in relation to the take over of Auspine Limited (the Parent company of SEAS Sapfor Forests Pty Ltd) it should be noted that the covenant holders interests are looked after by the Trustee (Australian Executor Trustees (SA) Limited) and the administration of the scheme is determined by the Trust Deed - there has been no change in the management of this scheme since the takeover by Gunns - the covenants are not ordinary negotiable securities and Auspine is not obliged to undertake to repurchase or resell any covenant - Auspine maintains a Sales Register of those wishing to sell, and subject to the allocation of funds may be prepared to buy - a request to sell must be in writing and submitted to Auspine Limited Phone 08 8721 2247 Fax 08 8721 2297 by the covenant holder, advising their holding, full name, current address and contact number