Fletcher, Carter prepare $2 bn bid against Citic

Friday 6th July 2001

UP A TREE: Receivership gives some players inside running

By Nick Stride

Fletcher Challenge Forests is preparing a $2.1 billion joint-venture bid for the Central North Island forests, market sources said yesterday.

The bid would compete with one already lodged with receiver Ferrier Hodgson by China's Citic, Fletcher Forests' former partner in the assets. Sources close to the partnership's banking syndicate said Fletcher had prepared a bid jointly with two partners.

The indications were that one was Carter Holt Harvey and the other an as yet unidentified US company.

Carter Holt chief executive Chris Liddell yesterday declined to comment.

Fletcher Forests spokeswoman Jacqui Millar said the company was talking with a number of other parties but said the discussions were confidential.

The Commerce Commission late yesterday cleared Carter Holt to buy 100% of the Central North Island forests. Carter Holt said it would not necessarily bid.

The joint venture is believed to have agreed to split the asset three ways and to inject sufficient cash to gear the balance sheet to a 50:50 ratio of equity to debt.

The proximity of the Fletcher joint bid is understood to have triggered Citic's bid.

Receivers Michael Stiassny and Grant Graham are preparing to call an international tender for the forests.

The tender has been held up because Ferrier Hodgson has had to deal with Citic's long-standing legal claims that Fletcher Forests mismanaged the partnership's assets.

Because the claim was against the Fletcher-Citic partnership and not against Fletcher Forests itself, the receiver inherited Citic's action.

Ironically, sources said, the delay this has caused has given Fletcher Forests breathing space to reorganise after a balance sheet restructuring early this year that saw it place shares and conduct a deeply discounted rights issue.

The partnership was placed in receivership in January.

Fletcher Forests has an immediate advantage over any rival bidder because it already has junior debt in the asset.

The partnership went into receivership owing its banking syndicate about $US625 million ($1.6 billion) and Fletcher Forests $US238 million ($600 million).

In effect that means a Fletcher consortium needs to come up with $600 million less cash than rivals to finance its offer.

The sales process will be undertaken as foresters struggle with the lowest log prices since the Asian crisis of 1997.

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