Gerry Harvey’s Brain Fart Leaves A Real Mess
After making an initial $34 million investment in a dud farm at Coomboona, farmer, Gerry Harvey has generally dismissed questions about it by arguing the whole thing was immaterial to the group’s overall operations.
In what now appears to be a “bugger shareholders” attitude Gerry Harvey is now going to have to explain to shareholders at his next AGM how he screwed up so badly with shareholders unlikely to recoup its secured debt in the Coomboona dairy operations leaving shareholders out of pocket to the tune of tens of millions.
A Harvey Norman disclosure yesterday to the ASX which was buried on the second page of a price-sensitive announcement, states that it expects the carrying amount of its debts to now exceed what can be recovered from the assets by some $13.7 million to $29.1 million.
The AFR said that given its total secured debts which total some $74 million, that suggests a valuation for Coomboona of $45 million to $60 million for the dud farm, that is if someone else buys it.
Of course, that potential loss is only of Harvey Norman’s secured debts, not including other debts incurred in the running cost of the farm. Nor does it cover the $34 million Harvey Norman shareholders put down in 2015 to buy half the equity in Coomboona, now written down to zero.
While the shareholder nightmare — is very nearly over. Some four months after Coomboona was first put into administration, the fallout from farmer Gerry Harvey’s ambitions is set to linger with his retail operation and it’s links with questionable franchisees still under investigation by Federal Authorities.
The AFR claims that If Harvey Norman hadn’t assumed NAB’s debts in funding the farm initally and an immediate fire sale had taken place, its recoverable interests in Coomboona would probably have been less than $20 million. By assuming NAB’s debt and paying the running costs of the farm, it’s not clear that Harvey Norman shareholders will be better off. All told they will have ploughed more than $110 million (so far) into the brain fart, with slim chances of recouping it back from a sale.