Sino-Forest Corp. said it is “optimistic” that it will reach a deal with bondholders to waive a default breach on the company’s US$1.8-billion of debt.
The scandal-plagued forestry firm received notices of default on Dec. 16 regarding its senior notes, which triggered a 30-day period for the company to address the breach. Sino warned that it will not be able to file its overdue third quarter results and cure the default within 30 days, as its special committee is still trying to complete its investigation.
However, Sino is in talks with the noteholders, and is optimistic that holders of a majority of its debt due in 2014 and 2017 will agree to waive the breach. That would give the committee more time to finish its work and allow Sino-Forest to potentially become viable again.
“The company and the ad hoc committee have negotiated the terms under which the defaults under the senior notes will be waived,” Sino said in a statement.
Shares of Greenheart Group Ltd., a public timber company controlled by Sino-Forest, jumped 50% in Hong Kong trading on the news.
Sino has been operating under a black cloud since last June, when short seller Muddy Waters LLC accused the company of fraud. The Ontario Securities Commission halted trading of the stock in August.
As the committee’s investigation into the company continues, Sino warned that its historic financial statements and related audit reports should not be relied upon. The committee is trying to unravel the company’s complex web of third party relationships and get answers to questions about unusual documents. The OSC and the Royal Canadian Mounted Police are also investigating the company.