Citic Beijing Stung - Original Statement
Explanatory Note: Following is the notice Scoop received withdrawing the original Citic release which was issued in error by Network Communications yesterday. Scoop has decided to reinstate it as background information to provide full context to the statement from Fletcher Challenge Chief Executive Michael Andrews (See…. http://www.scoop.co.nz/mason/stories/BU0011/S00209.htm ) – Scoop Editor
November 29, 2000
Important Notice To All Media
At approximately 2pm today you would have received a media statement from CITIC New Zealand sent by Network Communications.
This statement was sent in error by Network, and we ask that you destroy it. The correct statement follows.
You will notice that the original statement was dated November 28. This was an early draft, and through an error on Network’s part was sent instead of the following, dated November 29.
Network apologies to the media, to CITIC and to any other party for the embarrassment that the error may have caused.
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 Chairman and Chief Executive.
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.
Dr Deane talked about “cultural differences in terms of attitudes to the binding nature of contracts” while Mr Andrews has inferred that the relationship with CITIC in Beijing was “working well”.
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”.
In particular, we have been told to inform Dr Deane that not only are his comments condescending they could be interpreted as “having racist overtones”.
While Beijing’s response is in moderate language, the intensity of the feeling should not be under estimated.
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.
CITIC has the financial ability to put additional capital into the Forest Partnership and will do so if it can resolve its outstanding disputes. These 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 creation 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.