China Forestry attempts debt restructure
Timber producer to negotiate with investors over debt after defaulting on bond repayments
China Forestry Holdings, the timber producer that defaulted on US$180 million of US dollar-denominated bonds, said it will negotiate with investors to restructure its outstanding debt.
The Carlyle Group-backed company is considering "various options" with advisers after missing a half-yearly 10.25 per cent coupon on its November 2015 notes, it said in a Hong Kong stock exchange filing. While the non-payment constitutes an event of default, the logger has not received a demand for repayment from the bonds' trustee, it said.
We think [China Forestry] will face difficulty in getting financing support
Beijing-based China Forestry will consult with bondholders on the notes' outstanding principal and accrued interest. The default occurred after a one-month grace period expired as more time was sought to audit its books and complete a debt buyback plan. Since discovering financial irregularities in early 2011, the company has only been able to account for less than 1 per cent of sales.
"The surprising thing to me is that there are still questions regarding financial reporting and transparency, and regarding forbearance, default and liquidity," said David Tawil, co- founder of New York-based hedge fund Maglan Capital. "It goes to show you that, even with the involvement of a reputable investor like Carlyle, fidelity issues abound in connection with companies in emerging markets and China."
Citicorp International, the bond trustee, declined to comment if it will issue any demands anytime soon.
Among China's recent dollar-bond defaults, LDK Solar failed to repay US$21.1 million to its noteholders in April 2013 and Suntech Power reneged on US$541 million of debt a month earlier. Sino-Forest, once China's largest timber grower, defaulted on US dollar bonds before filing for bankruptcy in March last year.