Forum Archive Index - July 2001

["G Stolwyk" <stolwyk@wave.co.nz>]

Jeff,

 

Yes, I have always been well aware of the relationship of the FFS and RBC stocks and any consequences thereof.

 

Bear in mind, that although RBC's largest asset by far is the FFS component, the latter still has some 2850 mill. shares while RBC will have some 277 mill. after a buyback, using, say 80 cents/ share. 

 

1. Taking into account the new accountancy rules which reduces the carrying value to $ 1.1 Bill., the FFS/ FFSPA :  NTA = 57 cents. This may have risen or remained stable during the last 6 months.

 

On that basis alone, there is room for the FFS and RBC shares to move. At the same time, as mentioned, we are at the bottom of the cycle unless FFS can convince me otherwise!

 

2. One should always quote $ US 225 mill. as the second tier debt, FFS  likes to recover. (  One good source told me that the original loan was about $ US 280 mill, the difference was written off in the books.

 

But, should there be a surplus incurred by the Receiver, FFS will need to be paid the $US 280 mill. first, before there is a secondary distribution)

 

At present, the above mentioned $ US 225 mill. is not $ NZ 510 mill. but is about $ NZ 550 mill. 

 

We don't know whether the Receiver's  book will be close to what is needed to cover the FFS loan.

 

However, as said, FFS can afford to lose another $ NZ 40 mill. and still use the $ NZ 510 mill number currently stated in their book.

 

3. Should FFS with say 2 others buy the CNIF forests then they may not have to put in additional cash to cover that as the $ NZ 550 ( or whatever mill. ) will be enough to finance it.

 

It will mean that FFS could carry on as the manager of the estate, receiving fees accordingly.

 

4. If this were to occur, then the position is that FFS will become attractive as a takeover proposition: There is stabilisation and FFS effectively is cutting from a larger area than their own. ( At this stage, I don't know if CITIC will continue with any claim ).

 

Weyerhauer could then become one of the names involved. In any case, FFS holders should take note of the remaining name( s) in a 3 way partnership. ( Exclude Carter Holt as a company to take over FFS ).

 

5. Summary: There is plenty to speculate on future events. The world economy does not look that great; however, FFS is selling at a heavy discount and trees will continue to grow, regardless!

 

Gerry  

Holds RBC

Disclaimer: Readers are not asked to buy, hold or sell FFS or RBC shares. To do so, will be entirely at their own risk.