TORONTO (Reuters) - A Canadian court on Friday extended a creditor protection order for Sino-Forest Corp by five weeks to June 1, giving the embattled Chinese forestry company more time to move forward with asset sales.
Justice Geoffrey Morawetz of the Ontario Superior Court declined the Toronto-listed company’s request for an extension until July 9, but agreed to leave the order in place for about a month beyond its initial April 29 expiration.
Sino-Forest, accused of fraudulently exaggerating the size of its forestry assets, says the allegations have paralyzed its business.
“I am satisfied that the applicant is working in good faith,” said Morawetz, adding that the court would consider a further extension after it weighs other motions, including those in a related shareholder lawsuit.
Sino-Forest’s shares tumbled last June after short-seller Carson Block and his firm Muddy Waters accused the company of swindling investors. Sino-Forest is now battling several lawsuits, on top of investigations by regulators and law enforcement authorities.
The company’s stock, halted for months, is being delisted by the Toronto Stock Exchange in the wake of the bankruptcy protection proceedings.
Sino-Forest’s lawyers said in court the company had started putting its assets up for sale and that the extension of the stay period would provide stability to Sino-Forest’s business while it works through the sale process.
Sino-Forest said the initial phase of the sale process involves soliciting nonbinding letters of intent from potential bidders. This phase is expected to be completed by June 28.
In a separate proceeding on Friday, the Ontario Securities Commission (OSC), Canada’s main securities regulator, extended its cease trade order on shares of Sino-Forest until July 16.
Hugh Craig, a senior litigator with the OSC, said the extension beyond the May 9 delisting date was necessary as the stock could still potentially be traded over-the-counter after it is delisted by the Toronto Stock Exchange.
He declined to say when the regulator will file its official statement of allegations against the company.
“I would submit that the issuance of an enforcement notice ... is a clear signal that staff’s investigation has proceeded to the cusp of issuing a statement of allegations,” Craig told Mary Condon, who is Vice-Chair of the OSC.
Earlier this week, the Ontario Securities Commission said it has served Sino-Forest and some current and former officials of the company with enforcement notices. Such notices are issued by the OSC at or near the end of an investigation and set the stage for the regulator to commence formal proceedings.
Reporting By Euan Rocha; Editing by Janet Guttsman