getting things sorted out

  1. 1,219 Posts.

    HOMEX - Perth

    Tuart provides the following information to the market further to its
    announcement that it is negotiating a debt facility.

    On Friday, 26 July 2002 Tuart obtained formal approval from
    financiers which subject to documentation is for a total borrowing of
    $4.75 million for Southern Wine Corporation and the Fernvale Unit

    Drawdown of the first $950,000 was intended to be utilised to
    re-finance the existing Commonwealth Bank Secured Mortgage over the
    vineyard at Preston Vale owned by the Fernvale Unit Trust.

    The balance of the funds will be borrowed upon approval by the unit
    holders of the Fernvale Unit Trust. In this regard a meeting will be
    convened as soon as practicable to seek that consent.

    As previously indicated however a condition of the loan will require
    Southern Wine Corporation Ltd to compromise the outstanding tax
    liability that arises in respect of the period prior to the
    acquisition of control of Southern Wine by Tuart.

    On Friday, 26 July 2002, Southern Wine Corporation Ltd resolved to
    convene a meeting of the growers of the SWC Managed Investment
    Scheme. At this meeting growers will be asked to vote on a range of
    proposals namely:

    (a) whether the growers individually contribute $1,800 per growers
    unit (raising a total of $2 million) to fund the shortfall in
    management expenses likely to occur in the current financial year; or

    (b) the growers resolve to authorise Southern Wine to borrow the
    funds on behalf of the growers secured against the growers interest
    in the scheme to meet the ongoing expenses; or

    (c) whether the growers vote to terminate the managed investment

    In the event that no resolution is passed by the growers, South Wine
    Corporation has resolved to initiate procedures underthe
    Corporations Act to terminate the managed investment scheme.
    Termination of the scheme will not affect the ownership of the land
    upon which the vineyard is situated. Southern Wine will continue to
    own approximately 60% of the units in the Fernvale Unit Trust with
    the balance being owned by growers.

    A copy of Southern Wine Corporation's letter to each of the growers
    is annexed to each announcement.

    Further, since the date of the last announcement the Australian
    Securities and Investments Commission had indicated that it holds
    concerns as to the compliance by Southern Wine Corporation Ltd with
    its security dealers' licence and unless Tuart addresses those
    concerns will apply for the appointment of a provisional liquidator.
    An application by ASIC seeking an order in those terms has been
    lodged by ASIC in the Supreme Court.

    To resolve ASIC's concerns and to formalise a compromise with the ATO
    the directors of Tuart required the directors of Southern Wine
    Corporation Ltd to take steps today to appoint Mr Mark Reilly and Mr
    Glen Featherby as joint and several voluntary administrators of
    Southern Wine.

    From initial discussions with the administrators of Southern Wine
    Tuart believes it is still the intention of the administrators to
    proceed with the meeting of growers described above.

    During this period of time:

    1 Tuart will take steps to attempt to finalise the leading. We are
    uncertain as to the impact the appointment of an administrator will
    have on the finance approval.

    2 The lending proposal will form the basis for a Deed of Company
    Arrangement to be put to creditors on the basis that upon
    compromising of various debts the company's administration can be
    terminated and returned to the control of Tuart.

    3 In the meantime if growers vote to provide additional equity funds
    to finance the shortfall in management expenses then the financial
    position of Southern Wine will be improved considerably.
    Alternatively, if the growers vote to terminate the scheme then the
    ownership structure of the vineyard will be simplified and this will
    enable Tuart to more readily deal with its beneficial interest in the

    In summary, the board of Tuart believes that the step of placing
    Southern Wine in administration is a necessary step to resolve the
    historic debts inherited by the company when it took over the Nelson
    Ridge Croup.

    Tuart hopes that the financepackage it secured can be maintained.

    The process of administration should ensure that the funds raised
    from lenders are applied for the current economic interests of the
    growers and Southern Wine (as a subsidiary of Tuart) and are not
    utilised in paying out historic debts.

    M Bennett



    HOMEX - Perth



    I write to you in my capacity as chairman of Southern Wine
    Corporation Ltd, the Responsible Entity of the SWC MIS and enclose a
    Notice of Meeting in relation to a meeting of scheme members to be
    held on Tuesday, 20 August 2002.

    The SWC MIS is currently entering its fourth year. To date the
    Preston Vale vineyard property has been established to world-class
    standards and is in excellent operational condition. April 2002
    marked the completion of the first significant growing year with over
    1,000 tonnes of grapes grown.

    Although the 2002 growing season produced a harvest yield consistent
    with prospectus forecasts, the receipts for grape sales were
    significantly affected by the major over supply conditions in
    Australia for red grapes. The white grape varieties were readily sold
    for good prices but the whites only represent approximately 20%-30%
    of the total crop. The Responsible Entity managed to secure sales for
    a significant proportion of its red grapes, but unfortunately the
    failure of one buyer to take delivery of a significant quantity of
    grapes meant a large quantity of grapes could not be harvested. In
    addition, prices for those red grapes sold were lower than prices for
    comparable produce in recent years.

    The downturn in the red grape market is a serious issue for the
    Scheme. The Constitution of the Scheme provides that Management Fees
    for Year 4 onwards are to be in the first instance recouped by the
    Responsible Entity from grape sales. There is however a shortfall
    between grape sales and Management Fees of approximately $2 million
    for the 2002/2003 financial year, representing $1,800 per Licensed

    The shortfall has been exacerbated by the fact that a small but
    significant number of members of the SWC MIS have defaulted in the
    payment of prior year Licence and Management Fees and repayment of
    loans taken out to finance their investment in the Project. These
    defaults have meant that the Responsible Entity has been left to fund
    the prior year shortfall in receipts from its own resources.

    Under the terms of the Licence and Management Agreement (forming part
    of the Scheme Constitution), where a shortfall occurs the Responsible
    Entity may request members to make additional contributions, subject
    to approval at a meeting of members.

    If the resolution to require an additional contribution is passed all
    members are bound to contribute and will be invoiced accordingly. In
    the event that individual members do not pay their contribution, the
    Responsible Entity has a number of choices available including
    terminating the defaulting member's interest it) the SWC MIS.

    If members do not wish to make additional contributions to fund
    ongoing management of the vineyard they have essentially two choices.

    Firstly, they can resolve for the SWC MIS to be wound up. In
    accordance with the Constitution, winding up would involve the
    appointment of a registered company liquidator essentially to sell
    the assets of the scheme, pay off any debts, and return the surplus
    (if any) to members. The principal asset of the SWC MIS is the lease
    of the Preston Vale vineyard from the Fernvale Unit Trust MIS, which
    lease runs to 30 June 2019. The principal liability of the SWC MIS is
    the money currently owed to the Responsible Entity for unpaid
    Management Fees, which the Responsible Entity has a right to recoup
    from any sale proceeds of the assets of the SWC MIS. In the event of
    winding up of the SWC MIS, members will still retain their membership
    of the Fernvale Unit Trust MIS, which owns the land on which the
    Preston Vale vineyard is planted.

    The other option available is resolve to authorise the Responsible
    Entity to seek to borrow funds secured against the future Project
    Income, failing which the Scheme will be wound up. The Responsible
    Entity has been for some time seeking to borrow funds in this manner
    and has received at least two proposals, which have progressed to an
    advanced stage. Whilst the Responsible Entity is hopeful that one of
    these proposals will come to fruition by the end of September 2002
    given the current market volatilities this is by no means guaranteed.
    The borrowing of funds will almost certainly also require the
    Fernvaie unit Trust to agree to a mortgage of the vineyard land. To
    this end, once any borrowing proposal is finalised, the Responsible
    Entity will convene a meeting of the members of the Fernvale Unit
    Trust to consent to this security. Full details of any proposal will
    be included in any Notice of Meeting sent to members of the Fernvale
    Unit Trust.

    It is important to note that ifmembers resolve to pay the additional
    Management Fees, this does not preclude the Responsible Entity also
    borrowing additional funds.

    In addition to the circumstances outlined above (namely the default
    in payment of management fees by a small but significant number of
    growers, the need for the Responsible Entity to fund the operations
    of the scheme from its own funds and the reduced receipt from the
    sale of grapes), the Responsible Entity has received a significant
    assessment for tax which raises a real issue as to the solvency of
    the Responsible Entity.

    For that reason the directors of the Responsible Entity intend to
    appoint a voluntary administrator (Mr John Carrello of PKF Chartered
    Accountants) to administer the affairs of the Responsible Entity
    pending the holding of the Meeting the subject of the enclosed

    During the period of voluntary administration the Responsible Entity
    will also be seeking to compromise its principal debts and
    particularly the assessment issue by the Australian Tax Office.

    In summary, members of the SWC MIS are essentially being given the
    choice to:

    1. contribute more funds to enable the Scheme to continue operating
    for another year and therefore protecting the investment they have
    already made in the Scheme;

    2. elect for the Scheme to be wound up with the possibility (but
    again without any guarantee) that members will receive a dividend in
    the winding up; or

    3. rely solelyon the possibility of the Responsible Entity to borrow
    funds to avoid the winding up of the Scheme.

    M Bennett


    HOMEX - Perth


    Notice is hereby given that a Meeting of the members of the SWC MIS
    will be held at 1st Floor, BGC Centre, 28 The Esplanade, Perth,
    Western Australia on Tuesday, 20 August 2002 at 10.00am (WST).


    The meeting is to consider and, if thought fit, to pass one only of
    the following three resolutions for the purpose of Clause 12.6 of the
    Licence and Management Agreement entered into by each member of the
    SWC MIS and forming part of the Constitution of the SWC MIS;

    1. That the members be required to make additional contributions
    pursuant to Clause 12.1(e) of the Licence and Management Agreement in
    the amount of $1,800 per Licensed Area, to make up the shortfall in
    Management Fees for the 2002/2003 financial year.


    2. That the SWC MIS bewound up in accordance with its Constitution.


    3. That the Responsible Entity seek to borrow funds secured against
    the future Project Income, or if the Responsible Entity is unable to
    borrow such funds on or before 30 September 2002 on terms considered
    by the Responsible Entity to be reasonable in the interests of the
    members the SWC MIS be wound up in accordance with its Constitution.

    R Kestel

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