Top Sino-Forest shareholder slams default plan

Wed Dec 14, 2011 3:38pm EST
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By Euan Rocha

TORONTO (Reuters) - Richard Chandler Corp, the largest shareholder in China-focused timber company Sino-Forest TRE.TO, slammed the beleaguered company's plan on Wednesday to trigger a debt default by failing to make a $10 million interest payment on its convertible notes.

Sino-Forest, until months ago the largest listed forestry company on the Toronto Stock Exchange, has been reeling since June, when short-seller Carson Block and his firm Muddy Waters accused it of exaggerating the extent of its Chinese assets.

Earlier this week, the company said it would delay reporting its financial results yet again, putting it in breach of certain debt covenants. Given the circumstances, Sino said its board has decided not to make the interest payment due on December 15, raising the prospect of insolvency proceedings.

The statement came only a few weeks after the company said a preliminary investigation by independent reviewers had shown no evidence of fraud.

Sino-Forest is one of numerous North American-listed China-focused companies to be mired in fraud allegations this year. The scandals have led to a number of cease-trade orders, lawsuits and regulatory probes.

Singapore-based Richard Chandler, which through its Mandolin Fund owns 19.5 percent of Sino's outstanding shares, said it was disappointed with Sino-Forest board's decision to not make the interest payment on the 2016 convertible notes.

"Sino-Forest has generated profitable growth since 1994 and the Richard Chandler Corp continues to have confidence in the underlying business of Sino-Forest," the firm said in a brief statement.

Alan Kelly, a senior adviser to the fund, which is run by New Zealand-born billionaire Richard Chandler, called Sino's board decision "disappointing and regrettable."   Continued...