Days after being rejected by a Kiwi billionaire, is there a new saviour on the horizon for embattled Tasmanian wood products group Gunns (ASX: GNS) and its pulp mill project?

The shares were trading at 16c late last week before the Kiwi billionaire Richard Chandler and his company Richard Chandler Capital (RCC), pulled out of a planned $150 million capital injection.

The company asked for a two-day trading halt from last Friday and yesterday an extension of the trading halt was requested for four more days.

Gunns suggested that it is in talks for another group to become involved in a financing deal.

Gunns said it had been negotiating a capital raising since it requested a trading halt to the company's shares on March 9.

"The proposed capital raising is intended to be in the nature of a pro-rata entitlements issue, to be made via a prospectus," Gunns said in its statement yesterday.

"The capital raising will be material to the company's financial position and strategy.

"Those negotiations have been with the company's major shareholders, a potential new institutional investor and investor banks," Gunns said.

The talks had not been finalised and would not be completed prior to expiry of the current trading halt, it said yesterday.

"Based on discussions to date, the company is confident of obtaining necessary commitments for the offer to proceed," Gunns said.

The new share issue will be pro-rata, which means that every existing investor will get an opportunity to maintain their stake in what will be a massive issue of shares - at least another 1.1 billion of them if Gunns continues to price the issue at 12c cents a share.

That will still leave it short of the $280 million it would have received under the Chandler deal.

Those funds would have retired most of Gunns' debt.

Gunns' institutional investors, which helped sink the Chandler deal (they didn't like control of the project going to the Singapore-based group), seem willing to put up funds via a placement and then the rights issue.

Gunns said yesterday that it expected to provide more information on RCC's decision to withdraw during the course of the suspension.

That might tell us more about the prospects for the pulp mill than Gunns has been willing to release.

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