Deal in offing over forestry

Friday 10th August 2001

By Campbell McIlroy

Speculation was mounting yesterday over how Fletcher Forests and Carter Holt Harvey might structure a deal to buy the failed Central North Island Forestry Partnership.

Rumours have been rife about Fletcher and Carter getting into bed with an offshore tree trust to buy the CNIF.

Analysts and industry insiders said the most likely scenario would see a virtual money merry-go-round result from the receivership sale if the consortium was successful.

The banks would roll over the $637 million of funding they have in place for the CNIF into the new forestry company.

Fletcher Forests also has $US225 million of senior subordinated debt in the CNIF which ranks ahead of Citic if there is any money left after the banks are paid back.

Whatever Fletcher's recovers from the receivership sale would then be put straight back into the new forestry company.

Carter Holt Harvey would come to the party with some of its forests creating a company with about 350,000ha of forests.

An offshore tree trust would then take an equal third share in the company in an effort to appease any Commerce Commission concerns about market dominance.

A forestry industry analyst said the consortium made sense as it would provide greater bargaining power with our international competitors.

"If they can't influence price they might at least be able to take away pricing volatility," he said.

Fletcher Forest chief executive Terry McFadgen said there was a lot of speculation in the market most of which he didn't think was particularly informed.

He said there were still quite a few months to run in the process and as the company was looking at a number of alternatives people would just have to be patient and see what unfolded.

Carter Holt Harvey chief executive Chris Liddell said it was an interesting idea.

But while the company had consistently said it was interested in the future of such a fundamentally large component of the industry he said was not in a position to comment on what if any roll Carter's were playing.

Another analyst said if the consortium was successful in buying the CNIF it would most likely seek a listing somewhere down the track as neither Carter nor Fletcher wanted to be owners of trees as it was a bad use of their capital.

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