RusForest: Liquidation analysis underway; bondholder meeting Jan. 25

By Caroline Salls

Pittsburgh, Jan. 7 - RusForest AB said Indufor Oy has been appointed to conduct an independent liquidation analysis of RusForest in an effort to help bondholders decide whether to support the company's proposed restructuring.

According to a company news release, RusForest bond agent CorpNordic Sweden AB has also issued a notice for a Jan. 25 bondholders' meeting.

RusForest said it began a broad strategic and financial review in August that resulted in a restructuring proposal announced on Dec. 12.

The company said its board of directors believes that the proposal delivers maximum value to all stakeholders. The proposal also has the support of largest shareholder Vostok Nafta.

In order to provide bondholders with more comprehensive information, CorpNordic and the company have agreed to engage Indufor to perform an independent liquidation analysis.

RusForest said the final report is expected to be available by Jan. 15, in advance of the bondholders' meeting.

Restructuring details

Under the restructuring proposal, the company's bondholders are being asked to reduce the bond's nominal amount, including accrued interest, by roughly 50% and to convert the reduced bond into newly issued shares in RusForest at SEK 0.04 per share.

The debt reduction and the conversion to shares would give bondholders about 93% ownership of RusForest if all bondholders convert to shares.

Given that the company has limited cash and that operations are still cash flow negative, RusForest said shareholders are then asked to inject SEK 86 million in a guaranteed rights issue, and Nova Capital LLC is asked to inject about SEK 100 million in a directed issue at SEK 0.03 per share.

Following the injection of new capital, previous bondholders would own roughly 50% of RusForest. The pro forma market capitalization of RusForest at SEK 0.03 per share is SEK 400 million, the release said.

Rejection consequences

If the proposal is rejected, the board of directors believes the company will face an insolvency situation in the first quarter of 2013.

As previously reported, RusForest's balance sheet is under review. An impairment of up to SEK 500 million is expected in the year-end financials, to be released March 15.

The company said it has minimal cash remaining and has not been able to sell any assets since new management joined in August.

RusForest said it also has about SEK 186 million of secured debt in addition to the SEK 500 million of unsecured corporate bonds. The company said it would likely require additional secured credit facilities in the first quarter.

Additionally, the company said an insolvency situation could jeopardize its forestry leases, which are the most valuable part of RusForest's balance sheet.

RusForest is a Swedish forestry company operating in eastern Siberia and the Arkhangelsk region of Russia.

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