Ontario judge defers ruling on whether or not to approve Sino-Forest's restructuring following intervention by investors who oppose plan and want the right to opt out of settlement and pursue other action

Wendy Lisney

LOS ANGELES , December 10, 2012 (Industry Intelligence Inc.) –

A group of investors strongly opposed to the structuring of Sino-Forest Corp.’s insolvency caused an Ontario judge on Dec. 7 to defer until Dec. 10 a ruling on whether to approve the restructuring, reported the Financial Post on Dec. 7.

Justice Geoffrey Morawetz of the Ontario Superior Court of Justice also questioned why the group of institutional investors had waited until now to voice their opposition.

The investor group spoke up when its rights appeared to be in danger from the Ernst & Young LLP pact, said Won Kim of Kim Orr Barristers PC. The investors want to be able to opt out of the settlement and to pursue other actions against Ernst & Young, the Financial Post reported.

The group--which includes Trimark Investments, Comité Syndical National de Retraite Bâtirente Inc. and Northwest & Ethical Investments LP--wanted the court either to delay its approval of the restructuring or amend the settlement.

Under Ernst & Young’s proposed C$117-million settlement of class-action claims related to Sino-Forest’s collapse, Ernst & Young would be absolved from any further legal action related to Sino-Forest, reported the Financial Post.

If the settlements are not determined to be adequate, the investors want to be able to opt out of the class and seek other remedies, said John Mountain, senior VP legal at Northwest & Ethical Investments LP, which held thousands of Sino-Forest shares for investors.

At this stage, it is “premature” to talk about settlements because documents that would support such settlements have not been released and won’t be until a lawsuit enters the discovery phase, said Mountain, the Financial Post reported.

The investor group’s complaint should not delay Sino-Forest’s restructuring, which would pass on the company’s assets to bondholders, according to lawyers representing other parties involved in the company’s restructuring.

Other opportunities for intervention will occur after the restructuring is court-sanctioned because the settlement needs additional approval beyond the restructuring transaction, the lawyers said.

The restructuring should be approved as quickly as possible as Sino-Forest’s business is on the brink of complete collapse, said Derrick Tay, a lawyer representing Sino-Forest’s monitor, reported the Financial Post.

The primary source of this article is the Financial Post, Don Mills, Ontario, on Dec. 7, 2012.

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