Fletcher Challenge Forests Recapitalisation

Forests recapitalisation effected in
Fletcher Challenge separation process

AUCKLAND, 11 December 2000 – The Fletcher Challenge Forests Rights Offer closed on Friday last week. The offer will be fully subscribed through a combination of shareholders taking-up 61 per cent of their entitlements and the underwriters taking up 39 per cent.

“This recapitalisation will provide $414 million of new equity capital that will enable Fletcher Challenge Forests to reduce its debt, building a strong equity base for the implementation of the market-based strategies the company has developed,” Dr Roderick Deane, Chairman of Fletcher Challenge, said today. “It is pleasing to see the strength of support from existing shareholders that is demonstrated in this major equity-raising exercise,” he confirmed.

Under the underwriting agreement, Rubicon (a company to be formed as part of the Fletcher Challenge Group restructuring) is required to take up to 40 per cent of any underwriting shortfall. This amounts to $67 million. “This cash commitment is not required to be paid to the underwriter until Group separation occurs, and will be well within the financial capacity of Rubicon upon its establishment in March,” Dr Deane said.

The recapitalisation of Fletcher Challenge Forests undertaken through the Rights Offer is part of the Fletcher Challenge separation programme, and was approved by shareholders on November 2. Further stages in the separation programme, including a sale of the Energy Division to Shell and Apache, and the establishment of Building as a stand-alone company, will be voted on by shareholders in early March 2001. Fletcher Challenge Forests will remain as the residual continuing business of Fletcher Challenge, and Forests’ shareholders will vote, along with shareholders in Energy and Building, on remaining separation issues. Documentation and voting forms will be provided to shareholders during February.

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