Business

Winnipeg Free Press - PRINT EDITION

Sino-Forest Corp. for sale as it seeks bankruptcy protection

By: Craig Wong

Posted: 03/31/2012 1:00 AM | Comments: 0

TROUBLED Chinese timberland company Sino-Forest Corp. (TSX:TRE), which was accused last year of being a massive fraud, is filing for bankruptcy protection and putting itself up for sale.

Sino-Forest said Friday if it doesn't receive a suitable takeover offer, the company will implement a restructuring plan under the Companies' Creditors Arrangement Act that will see its lenders take control.

"We believe the full value of our assets will only be achieved if we are able to continue operating the business and repair and preserve relationships with our customers and suppliers," Sino-Forest chief executive Judson Martin said in a statement.

"We believe that the CCAA restructuring process is the best method to secure our future and will allow the time and stability required to normalize operations following the allegations made against the company by Muddy Waters."

The plan follows a deal with an ad hoc committee of its noteholders that represents a significant portion of the holders of the company's debt.

Sino-Forest was accused of fraud last year and faces investigations by securities regulators and the police. Though the company has denied the allegations, its stock has been halted for months on the Toronto Stock Exchange.

Sino-Forest also said Friday it is pursuing a lawsuit against Muddy Waters Research and its research director, Carson Block, as well as others who have accused the company of fraud.

The company accused Muddy Waters and Block of making defamatory statements and is seeking $4 billion and the recovery of profits made by the short seller and others.

Block declined to comment on the lawsuit as he had not seen it, but repeated his assertion Sino-Forest was a fraud.

"This is yet another indication of what we have said all along, that Sino-Forest's management has committed a massive fraud and has deceived its shareholders and creditors," Block said in a statement.

"If the company were really generating close to $2 billion in operating cash flow, it would not have had to file for a court-supervised restructuring with its creditors."

The company said it has the support of holders of 40 per cent of the aggregate principal amount of its notes for its request for court protection from creditors in Ontario Superior Court.

Sino-Forest, which owns and manages tree plantations as well as other manufacturing operations in China, was once the most valuable forestry company on the Toronto Stock Exchange.

The stock last traded in August 2011 for $4.81.

Richard Chandler, a New Zealand billionaire investor, was the largest holder of Sino-Forest shares, with just under 20 per cent, while New York-based Davis Advisors held about 17 per cent of the company.

Shareholders typically receive little or nothing under a CCAA restructuring.

As part of its announcement, Sino-Forest said it had US$392.2 million in cash as of March 2, including $185.2 million in offshore accounts.

The company forecasts it will spend about $5 million a month on professional fees during the restructuring before it emerges from CCAA protection in the third quarter when it expects another $35 million in one-time costs.

Sino-Forest faces shareholder lawsuits in Canada and the U.S. alleging a fraud at the company.

Sino-Forest has said it "intends to vigorously defend the action."

-- The Canadian Press

Republished from the Winnipeg Free Press print edition March 31, 2012 B4

Factual inaccuracy? Something missing? Help improve our journalism.

Know about news? Share your story suggestions, photos and video.

Spelling error? Punctuation problem? Send us an email if you’ve found a typo.

More Business

Undock

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is register and/or login and you can join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.