Sino-Forest Files for Bankruptcy Protection, Seeks Sale
Sino-Forest Corp. filed for bankruptcy protection as part of a plan that may see the Chinese timber grower company sold to bondholders, nine months after it was accused of fraud by short seller Carson Block, Bloomberg reported. The company obtained an initial order for creditor protection in the Ontario Superior Court under the Companies’ Creditors Arrangement Act, Sino-Forest said yesterday in a statement. The company said in an earlier statement it reached an agreement with bondholders to seek a sale to a third party or a restructuring under which they would acquire substantially all of its assets. Investors in Sino-Forest, once the largest Chinese forestry company by market value, lost about C$3.3 billion ($3.3 billion) since Block’s research firm Muddy Waters LLC published a report June 2 accusing it of overstating earnings. The shares plunged 74 percent before being suspended Aug. 26 amid investigations by Canadian regulators and police. Allen Chan, the company’s co- founder, stepped down as chief executive officer in August. “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 yesterday in an e-mailed 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.” Read more.