Sino-Forest says 72 per cent of noteholders support its restructuring plan

TORONTO – Troubled Chinese forestry company Sino-Forest Corp. (TSX:TRE) said Friday that holders of about 72 per cent of its outstanding notes have agreed support a restructuring at the company.

Sino-Forest said the support follows a deal with an ad hoc committee of noteholders in March to support “either a sale of the company to a third party or a restructuring under which the noteholders would acquire substantially all of the assets of the company.”

Once the most valuable forestry company on the Toronto Stock Exchange, Sino-Forest was accused of fraud last year by short seller Muddy Waters Research.

Sino-Forest and several former executives have since also been accused of lying to investors and attempting to mislead investigators by the Ontario Securities Commission.

The case has also been referred to the RCMP for investigation.

The company filed for court protection from creditors earlier this year and put itself up for sale, saying that if it doesn’t receive a suitable takeover offer it will implement a restructuring plan under the Companies’ Creditors Arrangement Act.

Since then, Sino-Forest has been working to gain support from its noteholders.

On Friday, the company said noteholders holding at least two-thirds of the principal amount of each of Sino-Forest’s four series of notes have now agreed to support a restructuring.

Sino-Forest owns and manages tree plantations as well as manufacturing operations in China.

The company has been accused of overstating its assets and revenue as well as misleading investors as to the relationship between Sino-Forest, founder and former chief executive Allen Chan and Greenheart, a publicly traded company listed in Hong Kong.

The regulator also alleged Chan secretly controlled companies that received more than $22 million when Sino-Forest bought a controlling interest in Greenheart, which has forest concessions in Suriname.

Chan resigned as chief executive of Sino-Forest in August after the OSC first began its investigation, but remained founding chairman emeritus until he resigned from the company in April.

Sino-Forest filed a report by its own independent committee earlier this year into the allegations by Muddy Waters, but fell short of bringing investors any closer to seeing a return on their investment in the company.

Its shares have been delisted from the Toronto Stock Exchange.