TORONTO, March 30, 2012 /PRNewswire/ - Sino-Forest Corporation ("Sino-Forest" or the "Company") (TSX:TRE) today announced that it has reached agreement with an ad hoc committee of its noteholders (the "Ad Hoc Committee") on the material terms of a transaction (the "Transaction") which would involve either a sale of the Company to a third party or a restructuring under which the noteholders would acquire substantially all of the assets of the Company, including the shares of all of its direct subsidiaries which own, directly or indirectly, all of the business operations of the Company. The Ad Hoc Committee represents a significant portion of the holders of the Company's 5% Convertible Senior Notes due 2013, 10.25% Guaranteed Senior Notes due 2014, 4.25% Convertible Senior Notes due 2016 and 6.25% Guaranteed Senior Notes due 2017 (collectively, the "Notes" and holders of Notes, the "Noteholders").

The Company is initiating proceedings today in the Ontario Superior Court of Justice (the "Court") under the Companies' Creditors Arrangement Act (the "CCAA") seeking approval for a Court supervised restructuring process to implement the Transaction, including the immediate initiation of a sale solicitation process and a stay of certain creditor claims. Holders of approximately 40% of the aggregate principal amount of Notes have executed a support agreement (the "Support Agreement") in which they have agreed to support and vote for the Transaction. The Company will continue to solicit additional Noteholder support for the Transaction. Noteholders who wish to become "Consenting Noteholders" and participate in the Early Consent Consideration (as defined in the Support Agreement) are permitted to do so until May 15, 2012, and further information will be available on the website of the proposed monitor in the CCAA proceedings, FTI Consulting Canada, Inc. at http://cfcanada.fticonsulting.com/sfc.

Sino-Forest made the decision to initiate CCAA proceedings with the unanimous authorization of its Board of Directors after thorough consultation with its advisors and extensive consideration of other alternatives.

"We believe the full value of our assets will only be achieved if we are able to continue operating the business, and repair and preserve relationships with our customers and suppliers. We believe that the CCAA restructuring process is the best method to secure our future and will allow the time and stability required to normalize operations following the allegations made against the Company by Muddy Waters, LLC ("Muddy Waters"). The Transaction we have negotiated is indicative of the support of a significant portion of Sino-Forest's Noteholders," said Judson Martin, Vice-Chairman and Chief Executive Officer of Sino-Forest.

Sale Process

The Support Agreement provides that the Company will make an application to the Court under the CCAA for an order approving a sale solicitation process pursuant to which Sino-Forest's financial advisor, Houlihan Lokey ("Houlihan") will solicit from third parties offers to purchase substantially all of Sino-Forest's assets (other than certain excluded assets).

Further details regarding the sale solicitation process will be announced by the Company following approval of a sale process order by the Court.

Restructuring Transaction

The Support Agreement provides that if the Company does not obtain an acceptable offer resulting from the sale solicitation process, the Company will implement a restructuring transaction (the "Restructuring Transaction") in which Sino-Forest will transfer substantially all of its assets, other than certain excluded assets, to a newly formed entity ("Newco") owned and controlled by the Noteholders in full and final settlement of all claims of any person in respect of the Notes. The assets transferred to Newco pursuant to the Restructuring Transaction would include all of the shares of the Company's directly owned subsidiaries and all of the receivables of the Company owed by its direct and indirect subsidiaries, but exclude certain litigation claims of the Company against third parties which will be transferred to a litigation trust (the "Litigation Trust") established to pursue such claims, including claims against Muddy Waters, and US$20 million in cash, which will be transferred to and used to fund the Litigation Trust.

If the Restructuring Transaction occurs, the Support Agreement provides that Junior Constituents (as defined in the Support Agreement) will receive: (a) their pro rata share of non-transferable "Contingent Value Rights" of Newco which will entitle them to receive 15% of the value of Newco, if any, in excess of U.S.$1.8 billion (being the approximate principal amount of the Notes) plus accrued interest on the Notes up to and including the CCAA filing date, for no additional consideration upon the occurrence of a liquidity event of Newco within seven years following the implementation date of the Restructuring Transaction, and (b) a right to receive their pro rata share of (i) 100% of any proceeds realized by the Litigation Trust for claims against or settlements with Muddy Waters and its joint actors, and (ii) the first $25 million of any proceeds realized from claims against or settlements with third parties other than Muddy Waters and its joint actors. If at the time proceeds are available for distribution from the Litigation Trust, the enterprise value of Newco is less than 85% of the principal amount of the Notes plus accrued interest on the Notes up to and including the CCAA filing date (the "Threshold Amount"), 30% of the remaining proceeds realized from claims against or settlements with third parties other than Muddy Waters and its joint actors will be paid to Noteholders (up to a maximum of the difference between the Threshold Amount and the enterprise value of Newco) and the remaining proceeds will be paid to Junior Constituents. If the enterprise value of Newco at the time such proceeds are available for distribution from the Litigation Trust is more than the Threshold Amount, Junior Constituents will receive 100% of the remaining proceeds realized from claims against or settlements with third parties other than Muddy Waters and its joint actors.

Many of the terms of the Restructuring Transaction remain to be settled between the parties in definitive documentation. The transactions contemplated by this press release will be subject to various conditions, including relevant creditor, regulatory and Court approvals. Sino-Forest continues to be subject to a cease trade order of the Ontario Securities Commission which prohibits trading in Sino-Forest's securities.

Additional details regarding the Transaction are contained in the Support Agreement, a copy of which will be available at www.sedar.com and on the proposed monitor's website at http://cfcanada.fticonsulting.com/sfc. There can be no assurance as to when or if a Transaction will be completed, or as to the terms of any such Transaction.

Claim Against Muddy Waters, Carson Block and Others

The Company also announced that it has commenced an action in the Court against Muddy Waters, Carson Block, and others, relating to the allegations made against the Company by Muddy Waters, and trading in Sino-Forest shares prior to and following the public release on June 2, 2011, of a report prepared by Muddy Waters. The action alleges that public statements made by Muddy Waters and Carson Block were defamatory. The action seeks damages in the amount of $4 billion and the recovery of profits made by Muddy Waters and others in connection with the Muddy Waters report.

Cash Balance, Cash Flow Projections and Third Quarter Financial Statements

As part of its negotiations with the Ad Hoc Committee, and pursuant to confidentiality agreements, the Company provided to certain Noteholders who were parties to such agreements, information regarding the Company's cash balance as of March 2, 2012 and its expected cash flow needs for the remainder of 2012. The confidentiality agreements require Sino-Forest to publicly disclose this information by the sooner of the commencement of any proceedings under the CCAA and April 30, 2012. The cash balance and cash flow projections provided to such Noteholders are attached to this news release as Schedule A.

The cash balance and cash flow projections are internal documents prepared by management of the Company and are subject to the assumptions set out in the projections. In addition, the cash balance and cash flow projections were prepared as at March 2, 2012, and may no longer reflect the Company's current circumstances or the current estimates of management of the Company. Neither the Board of Directors of Sino-Forest nor any of its committees has approved the cash balance or cash flow projections. Sino-Forest does not, as a matter of course, publish its budgets or make external projections or forecasts of its anticipated financial position, expenditures, cash balances or cash flows. The non-public information provided to the Ad Hoc Committee was not prepared with a view to being disclosed publicly and is included in this news release only because such information was made available to the Ad Hoc Committee. Subject to applicable securities laws, Sino-Forest does not intend to or anticipate that it will, and disclaims any obligation to, furnish updated projections or forecasts or similar forward looking information to holders of securities issued by Sino-Forest or to include such information in documents required to be filed with the applicable Canadian securities regulatory authorities or otherwise make such information publicly available.

Sino-Forest will also file with the Court today in the CCAA proceedings, draft copies of its financial statements for the three and nine months ended September 30, 2011 (the "Draft Q3 Financial Statements"). The Draft Q3 Financial Statements will not be filed with the Canadian securities regulators, but will be available on the website of the proposed monitor at http://cfcanada.fticonsulting.com/sfc. Sino-Forest cautions readers that the Draft Q3 Financial Statements are in draft form only, and they do not and are not intended to comply with the requirements of applicable securities law or Canadian generally accepted accounting principles. As previously disclosed, the Company cautions readers that its historical financial statements, including the Draft Q3 Financial Statements, may not be reliable and should not be relied upon for any purpose. The Draft Q3 Financial Statements have been prepared by management of the Company and have not been reviewed or approved by the Board of Directors of the Company, any committee of the Board of Directors or the Company's auditors.

Other Matters

Sino-Forest has determined that it will not be in a position to file its audited annual financial statements for fiscal 2011 by the March 30, 2012 deadline. Sino-Forest has made considerable efforts to address issues identified by its Audit Committee and the Independent Committee and by its external auditor, Ernst & Young LLP, as requiring resolution in order for Sino-Forest to be in a position to obtain an audit opinion in relation to its 2011 annual financial statements. However, as yet, Sino-Forest has not been able to satisfactorily address those issues for audit purposes for the same reasons previously disclosed. Sino-Forest has also determined not to file its annual information form by the prescribed deadline and will apply to the Court for postponement of its annual meeting of shareholders for the duration of the CCAA proceedings.

Sino-Forest also announced that Albert Ip has resigned for health reasons from his position as Senior Vice President, Development & Operations North-East and South-West China. Mr. Ip has agreed to serve as a consultant to Sino-Forest on a part-time basis. "I would like to thank Albert for his service to Sino-Forest," said Judson Martin, Vice-Chairman and Chief Executive Officer of Sino-Forest.

Houlihan is acting as financial advisor to Sino-Forest, Bennett Jones LLP is acting as Canadian legal advisor to Sino-Forest and Osler Hoskin & Harcourt LLP is acting as Canadian legal advisor to the Board of Directors of Sino-Forest. The Ad Hoc Committee of Noteholders is being advised by Moelis & Company, Goodmans LLP and Hogan Lovells LLP.

About Sino-Forest Corporation

Sino-Forest Corporation is a leading commercial forest plantation operator in China. Its principal businesses include the ownership and management of tree plantations, the sale of standing timber and wood logs, and the complementary manufacturing of downstream engineered-wood products. Sino-Forest also holds a majority interest in Greenheart Group Limited (HKSE:00094), a Hong-Kong listed investment holding company with assets in Suriname (South America) and New Zealand and involved in sustainable harvesting, processing and sales of its logs and lumber to China and other markets around the world. Sino-Forest's common shares have been listed on the Toronto Stock Exchange under the symbol TRE since 1995. Learn more at www.sinoforest.com.

No stock exchange or regulatory authority has approved or disapproved of information contained herein. This news release contains forward-looking information within the meaning of applicable securities laws, including statements relating to: the Company's expectations regarding the proposed sale solicitation process pursuant to which the Company and its advisors would seek potential purchasers of the Company's assets and the expected terms of any such third party sale; the Company's expectations regarding the proposed restructuring transaction involving the Company pursuant to which Noteholders would acquire the assets of the Company and the expected terms and consideration payable under such transaction; the Company's beliefs regarding the benefits of a court supervised process under the CCAA and the perceived benefits of that process on the Company's attempts to normalize its operations; the Company's expectations regarding its ability to complete its annual financial statements; and the Company's intentions regarding the proposed closing of any transaction. The forward looking statements expressed or implied by this news release are subject to important risks and uncertainties. When used in this news release, the words "believe", "intend", "estimate", "expect", "will", "plan", "consider", "may", "projections", and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate in the circumstances. The results or events predicted in these statements may differ materially from actual results or events and are not guarantees of future performance of Sino-Forest. Factors which could cause results or events to differ from current expectations include, among other things: actions taken by Noteholders, other lenders, other creditors, shareholders, regulators, governmental agencies and other stakeholders to enforce their rights; the Company's ability to find a purchaser for the Company's assets in the sale solicitation process; the Company's ability to finalize definitive documentation regarding a sale transaction or restructuring transaction on the terms contemplated, if at all; the Company's ability to complete any sale transaction or the restructuring transaction in the timeframe contemplated, if at all, which is subject to the satisfaction or waiver of numerous conditions some of which are beyond the control of the Company, including the approval of the Court, the Company's creditors and other stakeholders and securities and other regulatory authorities; the outcome of examinations currently underway by law enforcement, securities regulatory authorities and the Company's auditors; the outcome of class action or other proceedings which have been or may in future be initiated against the Company; the accuracy and outcome of the results of tree asset testing undertaken by the Company; our reliance on key employees; our ability to acquire rights to additional standing timber; our ability to meet our expected plantation yields; the cyclical nature of the forest products industry and price fluctuation in and the demand and supply of logs; our reliance on the relationship with local plantation land owners and/or plantation land use rights holders, authorized intermediaries, key customers, suppliers and third party service providers; our ability to operate our production facilities on a profitable basis; changes in currency exchange rates and interest rates; the evaluation of our provision for income and related taxes; economic, political and social conditions and government policy in China, the Republic of Suriname and New Zealand, and stock market volatility; and other factors not currently viewed as material that could cause actual results to differ materially from those described in the forwarding-looking statements. For additional information with respect to certain of these and other factors, see the reports filed by Sino-Forest Corporation with applicable Canadian securities administrators. Sino-Forest Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

SOURCE Sino-Forest Corporation

PDF with caption: "SCHEDULE A". PDF available at: http://stream1.newswire.ca/media/2012/03/30/20120330_C9466_DOC_EN_11779.pdf