By GEOFF SENESCALL
Fletcher Challenge is understood to have appointed Credit Suisse First Boston to handle a rights issue for its problem forestry division after sale talks collapsed.
The move - tipped to be announced in the next 48 hours - will pave the way for the restructuring of the rest of the group.
This is likely to include the sale of Fletcher Energy to Royal Dutch Shell and the spinning off of Fletcher Building into a standalone company.
Fletcher Challenge spokeswoman Ginny Radford last night declined to comment on the prospect of an imminent announcement or any speculation around the restructuring.
And, in response to a Stock Exchange query on a 21 per cent plunge in Fletcher Forests' share price since October 3, the company said it was not in a position to make any announcement - only that intensive and comprehensive work on the separation process was continuing.
It is understood that CS First Boston was appointed last week after sale options for Fletcher Forests had been exhausted. But, given the collapse in Forests' share price from 80c to 62c yesterday, it is understood that First Boston had to renegotiate the rights issue price, leading to the announcement delay.
Merrill Lynch was given the job of handling the Forests sale, or separation from Fletcher Challenge, last November. Names such as US forestry investors John Hancock, Weyerhaeuser and Plumcreek were said to have looked through the books.
But the process was hindered by a dispute this year between Forests and the Chinese company Citic over their joint interests in the Central North Island Forest Partnership.
Now, Citic may have to play a role in the recapitalisation of Forests.
If it did, this would reduce the quantum of the rights issue, which the market was speculating could be for up to $400 million.
Meanwhile, the sale of Fletcher Energy to Shell is still pending Commerce Commission approval. A ruling is expected this week.
It is understood that the Shell bid is in conjunction with the US oil company Apache and will include a pro rata distribution of Fletcher Energy's shareholding in US-based Capstone Turbines.
On yesterday's closing price and exchange rate, the distribution of Capstone would be worth 267c a share for every Fletcher Energy share.
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