Giant forestry alliance in receivership

By PAULA OLIVER forestry writer

Receivers were last night appointed to New Zealand's largest forestry partnership, in a move that analysts say puts Fletcher Forests in the box seat in its bitter relationship with Chinese partner Citic.

A syndicate of 12 banks, owed more than $US637 million ($1.48 billion), put Michael Stiassny and Grant Graham in charge of the Central North Island Forestry Partnership. Taking in the Kaingaroa forest, the partnership holds 190,000ha of tree assets.

Mr Stiassny said he would look at options for selling the assets, and he expected the process to take six to nine months. Fletcher Forests would continue to manage the assets in the immediate future.

The partnership has been hit hard by falling log prices since it bought the massive estate from the Government for $NZ2.2 billion in 1996. The partnership's value was written down by $574 million last month.

Mr Stiassny said he expected strong global interest in the assets, and he did not believe the current low log prices would get in the way of getting fair value for the banks.

"You have to remember this is a long-term asset, and log prices will move up and down during the liftime of the asset - so, therefore, it's not any major impediment to us."

Market observers said Fletcher Forests had been flagging the receivership move for weeks.

Fletcher Forests holds $NZ511 million in secondary debt in the partnership. It was in a strong position, analysts said, because it could now bid up to that amount for the assets, without touching any other financial resources.

Citic held only equity, and could lose several hundred million dollars.

"It's good for Fletcher Forests, and it's not something that's just happened by accident - it's the only way they can get rid of Citic," said one analyst. "The banks have given the partners every opportunity to rectify their problems, and now they're taking action."

Both parties were likely to be keen to bid for the assets, analysts said, although neither company would confirm this.

Citic New Zealand managing director Cui Peisheng said the company regretted it could not come to an agreement with Fletcher Forests that would allow more capital to be injected into the partnership. A party had flown in from Beijing in an effort to strike a last-minute deal this week, but negotiations had broken down.

Citic will continue to pursue High Court action against Fletcher Forests.