As administrators began work with the board on restructuring the business, other players in the MIS sector were quick to distance themselves from investment models pushed by Great Southern.
They fear investors will react to the collapse of the two biggest players by steering clear of sector trusts to seek more secure investment options.
“We’re at pains to differentiate ourselves from those companies that are currently having problems,” Gunns Plantations manager Ian Blanden said yesterday.
“Our model is different in that we have a diverse range of income streams. We are not wholly reliant upon MIS. It would be unfortunate if people believed that all MISs are bad or simply won’t work.”
Mr Blanden said Gunns had not had any fallout from Great Southern’s demise but “any negativity in any industry is not a good thing for that industry”.
“I don’t think it will spell the demise of the MIS industry, at all,” he said.
Based on figures from investment research house Australian Agribusiness Group over the past five years, the MIS industry has raised about $5 billion.
Since the demise of Timbercorp and Great Southern, the remaining key players are Gunns, ITC, Wilmont, Macquarie Bank and Tropical Forestry Services.
Great Southern’s critics say the model was wholly reliant on continuing income from the sales of MIS, in the face of the global financial turmoil, drought and the federal Government’s tax-break changes.
“It’s the business model, not that MIS model that’s the problem,” said an industry source.
“They had few, if any, alternative sources of income streams.”
ITC chief Vince Erasmus cited its “multiple revenue streams” as a key point of difference.
“We don’t rely on the profits we make from MIS alone,” Mr Erasmus said. “Obviously we are worried about investor sentiment … but our model is very different to theirs,” Mr Erasmus added, although highlighting that up to 35 per cent of the harvest came back to ITC, giving it a strong cash-flow position.
He described the MIS model as “sound” but conceded there was an issue around funding MIS growth in the present climate.
ITC has assured clients it has a “healthy balance sheet, strong cash flow and we’re not going to be in trouble”.
A spokesman for Macquarie said the bank still saw MIS as an important investment, but in most of its portfolios MIS was only a small part.
“MIS should only make up a small part of investors portfolios,” the spokesman said.
AAG boss Marcus Elgin expected the MIS industry to undergo a repositioning, with a “a substantial flight to proving its security and stability”, meaning greater connection between the investment and land ownership.
Great Southern administrator Ferrier Hodgson was yesterday still piecing together what went wrong, ahead of the first creditors meeting next week.
Another criticism of the company’s model was that investors had the rights only to the income stream. In other models, such as Macquarie’s, investors own the land and trees, providing greater security.
Federal Agriculture Minister Tony Burke said yesterday: “I remain concerned about the impact on the industry and jobs.
“I met with representatives of the forestry sector this morning and discussed the potential impact on jobs, investment and rural communities.
“I will be seeking a briefing on Great Southern from the administrators.” Mr Burke added.
Great Southern non-executive chairman David Griffins, who described the banks’ reaction as disappointing, said it was hard to say if the MIS model was dead but it was being “severely tested”.
“I guess time will tell whether its got a role to play in future investments,” he said.
In criticising the banks’ reaction, he said Great Southern thought it had the right plan.
“We were hoping and expecting the banks to support that,” Mr Griffins said.
“It’s disappointing that wasn’t the case.
“We thought we were in a position to execute a plan that would have delivered value and I think that value is still there and well handled could still be realised.”
The group’s bank exposure is believed to be about $700 million. It understood it has two banking syndicate facilities, the biggest being a $350 million facility through the Commonwealth Bank, ANZ, Mizuhu Bank and CBA-owned BankWest.
ANZ’s exposure is about $170 million.
Separately, about 7000 small investors in Great Southern managed investment schemes have a separate loan with Bendigo Adelaide Bank of about $500 million.
It is understood obligations of those borrowers remain unchanged by the collapse.