Chinese claim on Fletcher at $159m

By GEOFF SENESCALL

The Chinese Government's investment vehicle, Citic, has confirmed that its legal claim against Fletcher Forests is for $159 million - half of what had been believed.

This was highlighted in a report yesterday by broker Credit Suisse First Boston, which is handling Fletcher Forests' $427 million rights issue.

CSFB further argued that in the "unlikely event of a successful claim," the effect on Fletcher Forests - Citic's joint-venture partner in the Central North Island forestry estate - would be negligible.

This was because Citic's claim was made in the name of the partnership. Therefore, half the full claim of $319 million would effectively go back to Fletcher Forests.

But the partnership breaches its banking covenants. Unless both Citic and Fletcher Forests inject more cash into the forestry estate, the banks could pull the plug on the partnership when they next meet in early January.

In that case, CSFB contended, the banks, which are owed $US650 million, would not release any money paid into the partnership.

Even if Citic were 100 per cent successful, the worst-case effect on Fletcher Forests' share price would be 2c a share, CSFB said.

But Citic's New Zealand vice-president of finance, Michael Kidd, said that within the past three weeks Citic had refiled its claim and it was now not through the partnership but directly against Fletcher Forests.

"Under any scenario, if we win any claims, they are not going to any secured debt holder," Mr Kidd said. Any money would go to Citic directly.

Fletcher Forests spokesman Mark Harris said he was unaware under the grounds which Citic could refile its claim given that the contract in question was between the partnership and Fletcher Forests.