Receiver denies forest sale delay

By CHRIS DANIELS

The Central North Island Forest Partnership receiver has dismissed speculation that low offer prices may halt the sales process.

The partnership, a joint venture between Fletcher Forests and the Chinese Government's Citic, collapsed early last year owing more than $1.5 billion to a banking consortium.

Since then, receiver Michael Stiassny has been trying to sell the huge forest asset.

Only two main contenders are believed to have been at the final stage of bidding - Fletcher Forests, which says it is trying to buy the forest with an unnamed partner, and Citic.

The forestry industry had a tough year last year, and reports are now circulating that banks may soon put the whole sales process on ice because offer prices are not enough to recover the debt.

But Mr Stiassny yesterday said any suggestion that the sale was about to be deferred was "incorrect speculation".

When asked about a possible timetable for any announcement of a new owner for the forest, Mr Stiassny said he had no idea.

UBS Warburg Forestry analyst Frances Loo said the prospect of the sale being delayed because of poor offer prices was a scenario that had been talked about late last year.

There did not seem to be many prospective buyers and the asset had been offered at a bad time - while forestry companies were carrying a lot of debt or already involved in a lot of merger and acquisition activity.

"When you look at a graph of log prices, we might be up off the bottom, but not amazingly so. It's a cyclical low point in terms of overall industry profitability,"she said.

"If it's covering its interest, which I believe it is, [halting the sale process] might be something they do."

If the partnership was taken off the market officially, the receiver could still consider unofficial offers or sell it in a separate transaction, Ms Loo said.

"From what we can understand, they want to recover the bank debt and cover the receiver's fees - that's the bottom line."

UBS Warburg estimates the partnership owes banks $1.5 billion.

Timber Industry Federation spokesman Kevin Hing said industry onlookers were more concerned about what any new owner would do with the forest, rather than any delay in the sales process.

There had been no big problem with the forest being in receivership, as logs were still being made available to sawmillers.

He agreed that the partnership's sales process had been conducted during a poor time for the forestry industry, with log prices very low.

"The interest is in who will own it and therefore what's going to happen to the log market, really.

"I guess the crunch will be when someone buys it and decides what to do with it."