PF Olsen Payment Protection

Getting paid for the forest produce you sell is obviously a critically important component of a successful forest harvesting and marketing project. However, the risks are often poorly understood by forest owners. Sometimes this drives forest owners to opt for an outright (advanced) lump sum sale of their forest or woodlot to minimise payment risk, even if that means compromising its total value.

Despite rigorous processes to check the credit risk of log purchasers and monitor credit exposure, there is always risk of payment default. Whilst defaults on payment for logs don’t happen all the time there have been some big ones in the last few years. Examples are Ahead Lumber, Bay Lumber, Clyde Lumber, Rennals, Southern Cross, Tachikawa, Thames Timber and most recently Waitane. In addition there are instances of log exporters failing to pay. When defaults occur they can be devastating for forest owners. Over the past few years the log market has become more volatile. This volatility is expected to continue and will put pressure on log purchasers’ financial viability and increase default rates. One industry observer is predicting that there will be 15 fewer sawmills operating in New Zealand, within the next 6 years, as the trend of industry rationalisation continues.

And that’s just the domestic market. The risks can be even greater in the sale of export logs where some of the purchasers offering higher prices have a short track record and little trading history.

Some forest owners get comfort from harvesting managers saying they will “guarantee” payments. However, this can simply transfer the risk from one risky entity to another. Most managers structure their trading business to have few assets (asset protection) and couldn't withstand the financial shock of a significant payment default, so the guarantee becomes worthless.

PF Olsen now offers Payment Protection to protect forest owners from the risk of not being paid for the sale of their forest produce. This protection is underwritten by Atradius (a global, financially secure insurance underwriter) and administered by National Credit Insurance.

The main benefits for PF Olsen Payment Protection are:

  • The programme is underwritten by Atradius NV, the second largest trade credit insurance group in the world with A3 and A (Excellent) credit ratings by Moody’s and AM Best respectively.

  • Very good coverage of log purchasers from large ones to small.

  • Very low premiums.

  • Higher log prices.

  • Proven pay-out record (see PF Olsen clients protected from Waitane default).

PF Olsen Payment Protection has been favourably received by the market and over 90% of PF Olsen harvesting and marketing client’s now have peace-of-mind knowing their precious logs sales revenue is secured.

If you would like to learn more about PF Olsen Payment Protection, please contact Peter Weblin at peter.weblin@pfolsen.com or DDI: 07 921 7276.