Billionaire investor Richard Chandler, the biggest shareholder in Sino-Forest Corp., said the Chinese timber company that’s fending off fraud allegations needs to change its chief executive officer and appoint new directors.
There are “serious concerns” about the ability of the board of Sino-Forest to fulfill its responsibilities, Richard Chandler Corp., Chandler’s investment company, said in a statement yesterday. Chandler and Sino-Forest’s second-biggest shareholder, Davis Selected Advisors LP, have said the company should reconsider its decision to default on a $9.78 million interest payment on its 2016 convertible notes.
Sino-Forest’s shares dropped 74 percent in Toronto trading after Carson Block, a short seller, said in June that the company had overstated its timber assets in China. Hong Kong- and Mississauga, Ontario-based Sino-Forest has denied the allegations and formed an independent committee to investigate them. The stock has been suspended from trading in Toronto since August by Canada’s main securities regulator, which is also conducting a probe.
“Any actions by directors, such as the non-payment of bonds, which compromises the going concern capability of Sino- Forest will potentially lead to shareholder actions for negligence,” Chandler said.
Sino-Forest said Dec. 12 it wouldn’t make the interest payment due Dec. 15 on the convertible notes and it would miss a deadline for publishing its third-quarter earnings. Chief Executive Officer Judson Martin said last month that the company was considering options including going private.
“Sino-Forest and its board are completely focused on acting in the best interests of all stakeholders,” Sino-Forest said yesterday in an e-mailed statement.
Chandler, a New Zealander who Forbes said last year had a net worth of $3.1 billion, owns 19 percent of Sino-Forest, according to data (TRE) compiled by Bloomberg. Richard Chandler Corp. spent at least C$148 million ($143 million) in July and August to increase its holdings after the plunge in Sino-Forest shares, the data show.
Chandler is concerned about “excessive time and money spent by the board on the investigation, the weak internal controls acknowledged by management, the unexplained delay to” the third-quarter results,’’ his investment company said in its statement. It also cited the delay to the final report from Sino-Forest’s independent committee and the non-payment on the bonds despite the company having sufficient funds.
The plunge in Sino-Forest’s shares has cost investors about C$3.3 billion ($3.2 billion), according to data compiled by Bloomberg. Hedge fund Paulson & Co., formerly Sino-Forest’s largest shareholder, sold its entire 12.5 percent stake in June, telling clients it had lost C$462 million since May 31 on the investment.
Davis said yesterday it was “shocked” by Sino-Forest’s failure to make the payment on its bonds. Davis said it holds more than 17 percent of the company.
“Because your published findings express no concern that this company is a going concern with real assets, we would strongly ask you to reconsider your recent decisions and take all steps necessary to protect shareholders,” Tucson, Arizona- based Davis said in a statement.
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