Citic Beijing Stung By Fletcher Challenge Comments

November 29, 2000

Citic Beijing Stung By Fletcher Challenge Comments

Statement made by Cui Peisheng, Managing Director, CITIC New Zealand Limited

On instructions from its Beijing head office, CITIC New Zealand has lodged a formal complaint with Fletcher Challenge at recent comments by its Senior Executives.

These comments, as reported in the media, have moved the relationship between CITIC and Fletcher Challenge Forests over management of the Central North Island Forestry Partnership from one of “contractual disagreement” to “very strained” at a corporate level.

The comments in question “cultural differences in terms of attitudes to the binding nature of contracts” and Mr Andrews comments that the relationship with CITIC in Beijing was “working well” are inappropriate.

CITIC in Beijing takes “great exception” to these comments and has instructed us to inform Fletcher Challenge that it regards the comments as “damaging to the relationship”.

CITIC New Zealand also wishes to make it quite clear that it is continuing with its legal action to resolve its disputes with Fletcher Challenge Forests and will also take whatever steps are necessary to protect its investment in the Forestry Partnership.

Fletcher Challenge has 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.

The CNIFP disputes involve management of the Forest Partnership, over cutting of the forest, the favoured status given to Fletcher Forests mills in relation to purchasing logs and the value of tax benefits.

Receivership is a last resort, but we have made it clear that this is preferable to CITIC injecting new capital that sees wealth transferred to Fletcher Forests.

Fletcher Forests’ contends that in the event of receivership, it will receive back all or at least some of its US$260 million in sub debt.

There are legal options open to us which makes that contention a very uncertain and lengthy process. Receivership also places at risk its ability to meet the terms of its guarantee to supply pulpwood to Norske and to continue to supply Forest Partnership logs on its own terms to its own mill facilities.

Any option open to Fletcher Forests in relation to arrangements with the banks following receivership is also open to CITIC.

What is clear is that CITIC’s claims against Fletcher Forests will survive receivership. In the event of receivership we would pursue our claims against Fletcher Forests with great vigour.

Fletcher Forests has consistently under estimated our determination to seek a fair resolution of the disputes between our two organisations.

Its current position is a continuation of that stance. Unless there is change on its part, receivership remains the most likely outcome.

For further information please contact
Mr Greg Molloy, CITIC New Zealand, Tel 0-9-309 1528. Cell phone 025 449 110

Issued on behalf of CITIC New Zealand by Dennis Lynch, Network Communications
Tel 0-9-379 3154

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