Dec. 12 (Bloomberg) -- Sino-Forest Corp., the timber company whose shares have plunged 74 percent since June, said it will miss a deadline to publish its third-quarter earnings and a final report into fraud allegations.
The company won’t be able to publish the earnings within the 30-day period stated on Nov. 15, Hong Kong- and Mississauga, Ontario-based Sino-Forest said today in a statement. There’s no assurance if or when the results will be released, it said. Sino-Forest also said a report by an independent committee into the fraud allegations now won’t be issued until 2012, instead of the year-end as previously stated.
Sino-Forest said it decided it won’t make a $9.78 million interest payment on its 2016 convertible notes that’s due Dec. 15. The company said it retained Houlihan Lokey and Bennett Jones LLP as its financial and legal advisers to assist in the evaluation of its options.
“In these circumstances, the board has determined that it must consider all strategic options available,” the company said in the statement. “The company may consider obtaining other sources of capital, including through the recapitalization of the company or the sale of some or all of its business.”
The committee was formed in June after short seller Carson Block’s research firm Muddy Waters LLC published a report that said Sino-Forest overstated its timber holdings in China. Shares of the company slumped 74 percent between June 1, the day before the report came out, and Aug. 25, the last day of trading before they were suspended by Canada’s main securities regulator, which began an investigation.
The plunge in Sino-Forest’s shares has cost investors about C$3.3 billion, according to data compiled by Bloomberg. Hedge- fund firm Paulson & Co., formerly Sino-Forest’s biggest shareholder, sold its entire stake in June following the Muddy Waters report, booking a C$462 million ($450 million) loss.
Other investors bought the shares after the allegations were made, including Singapore-based billionaire Richard Chandler, who acquired stock to become Sino-Forest’s biggest investor, according to data compiled by Bloomberg.
Sino-Forest, which hired PricewaterhouseCoopers LLP to assist with the committee’s probe, will seek permission for the shares to resume trading when it meets the Ontario Securities Commission on Jan. 23, Chief Executive Officer Judson Martin said in an interview last month. The OSC and the Royal Canadian Mounted Police are investigating the allegations.
Martin replaced Allen Chan, a co-founder of the company, who stepped down in August along with three other executives.
The company published the independent committee’s interim report on Nov. 15, in which the committee said it had confirmed Sino-Forest’s cash balance and obtained information from Chinese forestry bureaus verifying 77 percent of its timber assets.
The committee also said in its interim report that there were missing records. It reported difficulties in obtaining data, a lack of cooperation from some company executives, and an absence of an internal audit function.
Accusations against Sino-Forest have fueled investor concern that financial statements at some Chinese companies are misleading.
Regulators and investors have increased their scrutiny of Chinese companies trading in North America. The U.S. Securities and Exchange Commission began an investigation last year into the use of reverse takeovers, in which a closely held firm becomes public by purchasing a shell company that already trades.
--Editors: Simon Casey, Steven Frank
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