Sino-Forest Completes Restructuring Transaction
|Areas||Asia Practice, Banking and Finance Law, Commodity Tax/Customs, Corporate Finance and Securities, Corporate Restructuring, Litigation, Mining and Natural Resources|
Goodmans represented The Ad Hoc Committee of Noteholders of Sino-Forest in connection with the completion by Sino-Forest Corporation (“Sino-Forest”) of a restructuring transaction pursuant to a plan of compromise and reorganization under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”) and the Canada Business Corporations Act (the “Plan”) which was approved by its creditors and confirmed by the Ontario Superior Court of Justice.
The implementation of the restructuring transaction involved, among other things, Sino-Forest transferring substantially all of its assets to a newly formed entity (“Newco”) owned by the affected creditors of Sino-Forest in exchange for a release of the claims of affected creditors against Sino-Forest and its subsidiaries. The affected creditors of Sino-Forest were comprised primarily of holders of approximately US$1.8 billion of outstanding notes issued by Sino-Forest. Under the Plan, Sino-Forest’s outstanding shares were cancelled on March 4, 2013 and Sino-Forest has ceased to be a reporting issuer under Canadian securities laws.
The assets transferred pursuant to the restructuring transaction included all of the shares of Sino-Forest’s directly owned subsidiaries which owned all of the business operations of Sino-Forest. The assets transferred to Newco did not include certain litigation claims of Sino-Forest against third parties which were transferred to a litigation trust (the “Litigation Trust”) established to pursue such claims, certain cash amounts used to fund the Litigation Trust, and certain cash reserves established under the Plan.
Sino-Forest became the subject of class action litigation and securities regulatory inquiries in mid-2011 following publication of a third party research report that, among other thing, asserted that the company’s public disclosure was not accurate. Following an internal investigation led by an Independent Committee of the Board, Sino-Forest initially sought and obtained protection from its creditors pursuant to the CCAA on March 30, 2012 in accordance with a restructuring support agreement entered into with an ad hoc committee of its noteholders (the “RSA”). The RSA provided for the material terms of a transaction which would involve either a sale of Sino-Forest to a third party or a restructuring under which the affected creditors of Sino-Forest would acquire substantially all of the assets of Sino-Forest. In accordance with the RSA, Sino-Forest sought and obtained an order from the Court under the CCAA approving a sale solicitation process pursuant to which Sino-Forest’s financial advisor, solicited from third parties offers to purchase substantially all of Sino-Forest’s assets. In July, 2012, Sino-Forest announced that none of the bids submitted pursuant to the sale solicitation process constituted acceptable bids under the sale process procedures and announced that Sino-Forest was proceeding to implement the restructuring transaction contemplated by the Plan.