Joint venture forestry partners continue heated war of words

By Nick Stride

Friday 1st December 2000

The war of words between Fletcher Challenge and China's Citic blazed on this week with each side accusing the other of making misleading statements.

The two companies are locked in a battle over their 50:50 joint venture Central North Island Forests Partnership.

Citic, stung by comments made by FCL chairman Roderick Deane at a media briefing last Friday, circulated a strongly worded rebuttal.

It said Dr Deane's comments had moved the nature of the companies' relationship from one of "contractual disagreement" to "very strained."

FCL had "interpreted the situation to its shareholders as one where it is in a strong position and Citic has no alternative but to eventually commit to recapitalisation."

Without a recapitalisation by December 31 the partnership will breach banking covenants and risks receivership.

Citic reiterated it would not inject fresh equity into the partnership if that would transfer wealth from itself to FCL.

It also challenged FCL's contention that, under a receivership sale, it would receive some or all of the value of its junior debt.

"There are legal options open to us which makes that contention a very uncertain and lengthy process," Citic New Zealand managing director Cui Peisheng said.

"Receivership also places at risk [Fletcher Forest's] ability to meet the terms of its guarantee to supply pulpwood to Norkse and to continue to supply Forest Partnership logs on its own terms to its own mill facilities."

FCL chief executive Michael Andrews replied he was disappointed Citic "had chosen to try to resolve a commercial dispute ... in the media."

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