Sino-Forest restructuring analysed

Author: Ashley Lee | Published: 19 Feb 2013

KEY TAKEAWAYS

o Sino-Forest's restructuring of $1.8 billion in bonds was the first time a Chinese company underwent restructuring under Canada's Companies Creditors Arrangement Act

o Bondholders managed to secure Sino-Forest's PRC assets across eleven provinces in China

o Class action suits are ongoing against other involved parties; creditors are disputing Ernst & Young's CA$117 million settlement as Sino-Forest auditor. The Ontario Securities Commission is also taking action against the auditing firm.

The restructuring process of Toronto-listed Chinese forestry company Sino-Forest represents the first time a Chinese company underwent restructuring under Canadian law.

A scathing June 2011 Muddy Waters report deemed Sino-Forest a "multi-billion dollar Ponzi scheme," resulting in its default on two sets of bond payments: the company had $1.8 billion in outstanding bonds.

The fraud accusations against Sino-Forest and its subsequent default are often used as an argument for increased scrutiny of the accounting practices of Chinese companies listed...