Australia’s largest listed managed investment scheme company Great Southern has been placed in voluntary administration with debts of almost $700 million.
Great Southern is essentially an agribusiness company that manages trees, horticultural products and cattle, and then packages them as investment products and sells them to retail investors. The company had raised $1.8 billion over the last five years and has 12,000 shareholders and 43,000 investors in its products.
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Managed investment schemes (MISs) had been popular with small investors because they enjoyed generous tax breaks, but a change to tax rules in February 2007 stopped investors in non-forestry schemes (such as almonds, olives and vine-ripened tomatoes) from claiming up-front tax deductions.
While these changes have been subsequently challenged, the tax uncertainty has hit the MIS sector hard. Just last month, MIS plantation company Timbercorp collapsed with debts of $903 million.
Great Southern managing director Cameron Rhodes says the company started negotiations with its bankers shortly after the collapse of Timbercorp in order to organise short-term funding that would help it survive while it tried to sell $200 million worth of assets.
But the banks turned Great Southern down and administration was unavoidable.
“We very much still believe in the strategic plan we had in place and are committed to working with the administrators to capitalise on the work already done and leverage value from the company’s substantial asset base to ensure the best possible outcome for all stakeholders,” Rhodes said in a statement.
Administrator Martin Jones from Ferrier Hodgson will now study Great Southern’s extremely complex structure with a view to selling the company’s assets, although finding buyers in this capital-constrained environment will not be easy.
The Australian Shareholders’ Association’s chief executive Stuart Wilson has told the ABC this morning that there is little prospect of a return to investors.
“It’s a very serious situation for those who have invested; anyone who has invested in the company itself is likely to lose all of their investment, and there’s a good chance that investors in the funds are not going to see much return either.”