April 12, 2012 / 11:08 PM / 6 years ago

UPDATE 1-Sino-Forest seeks extension of creditor protection order

* Sino-Forest seeks extension on stay order until July 9

* Co says this would help facilitate its asset sale process

* Motion seeking extension comes before court on April 13

TORONTO, April 12 (Reuters) - Sino-Forest Corp has asked a Canadian court to extend a recently granted creditor protection order until July 9, arguing this would create certainty for potential buyers considering a bid for its forestry assets in China.

The Ontario Superior Court last month granted the embattled company creditor protection under Canada’s Companies’ Creditors Arrangement Act until April 29. Sino, which has been accused of fraudulently exaggerating the size of its forestry assets, says the allegations against it have paralyzed its business.

Sino-Forest’s Toronto-listed shares tumbled last June after short-seller Carson Block and his firm Muddy Waters accused it of swindling investors. Sino is now battling multiple lawsuits, on top of investigations from regulators and law enforcement authorities.

The company’s stock, which has been halted by regulators for months, is now being delisted by the Toronto Stock Exchange in the wake of the bankruptcy protection proceedings.

As part of a move to extract value for creditors, Sino plans to raise cash by selling its largely Chinese forestry assets. In a filing made to the court on Thursday, Sino said it has started the process of putting its assets up for sale.

The extension of the stay period to July 9, is necessary in order to provide stability to Sino-Forest’s business while it works through the sale process, the company said. The court is scheduled to hear the company’s motion seeking an extension of the stay order on Friday, April 13.

Sino-Forest’s Chief Executive Judson Martin told the court that the company’s stakeholders and business partners in China have taken a favorable view of its restructuring plan.

“Sino Forest’s employees appear to have embraced this restructuring as a solution that will provide a future for Sino-Forest companies,” said Martin in an affidavit, adding that no loans have been called by any of the company’s Chinese lenders.

Sino-Forest said the extension of the stay order would help facilitate the initial phase of the sale process, which involves the solicitation of non-binding letters of intent from potential bidders. The initial phase of the sale process is expected to be completed by June 28.

Martin has said it is critical for the company to conclude its restructuring plan by the end of the third quarter, as the company’s business is seasonal and vast majority of its dealings typically occur in the third- and fourth-quarter

“Stakeholders will therefore be prejudiced if Sino-Forest cannot complete a restructuring by the end of the third quarter, or soon thereafter, as the business will continue to be frozen through the critical fourth quarter,” he said.

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