Sino-Forest Halt Extended by Regulator on Lack of Disclosure

Canada’s main securities regulator said it extended the trading ban on Sino-Forest Corp. (TRE), the Chinese timber company fending off fraud allegations, because the company’s disclosures remain “incomplete.”

The Ontario Securities Commission lengthened the trading suspension, which was due to expire tomorrow, to at least April 16 at a hearing yesterday in Toronto.

The extension is in the public interest because Sino-Forest remains in default of continuous disclosure requirements and the company’s special committee of independent directors has yet to issue a final report on its investigation of fraud allegations, said OSC Vice Chairman Mary G. Condon.

“This lack of disclosure fails to provide a satisfactory assurance that an orderly market in the securities of Sino- Forest can be maintained,” Condon said at the hearing.

In August, the OSC halted trading of Hong Kong- and Mississauga, Ontario-based Sino-Forest after the shares fell 74 percent since June, when short seller Carson Block’s Muddy Waters LLC said the company had overstated its timber holdings.

Sino-Forest, which has denied the allegations, set up the special committee to investigate the assertions in the Muddy Waters report. The company said Jan. 12 the committee will release its findings by the end of this month.

Bondholder Talks

Sino-Forest, which is under investigation by the OSC as well as the Royal Canadian Mounted Police, said Jan. 12 that its debt holders agreed to waive a default triggered by delays in publishing third-quarter results. The company agreed to “monetize” assets to repay debt as part of the accord. It has $1.8 billion in outstanding bonds.

Chief Executive Officer Judson Martin, who took over after the resignation of company co-founder, Chairman and CEO Allen Chan in August, said in November that Sino-Forest may consider going private, selling a stake or seeking a merger to raise funds.

Yesterday’s OSC ruling is a setback for investors seeking to sell their holdings.

“I’m frustrated,” Bill Evans, 42, a Charleston, South Carolina-based mortgage originator who owns about 1,000 Sino- Forest shares, said by telephone before the ruling. “You don’t have to be a rocket scientist to know there’s some value there. It’s stupid.”

Holders of Sino-Forest shares lost about C$3.3 billion ($3.27 billion) following the June 2 publication of the Muddy Waters report. 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.

Sino-Forest last traded in Canada on Aug. 25 at C$4.81. The U.S. shares were halted after slumping to $1.38 on Aug. 26.

To contact the reporters on this story: Liezel Hill in Toronto at; Christopher Donville in Vancouver at

To contact the editor responsible for this story: Simon Casey at

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