Sino-Forest Announces Filing of Amended Plan of Compromise and Reorganization and Meeting Date for Creditors' Meeting

Implementation Date of Plan Extended to no later than January 15, 2013

TORONTO, Oct. 23, 2012 /CNW/ - Sino-Forest Corporation ("Sino-Forest" or the "Company") today announced that, in connection with its previously announced creditor protection proceedings under the Companies' Creditors Arrangement Act (Canada) (the "CCAA"), it has filed with the Ontario Superior Court of Justice (the "Court") an Amended Plan of Compromise and Reorganization concerning Sino-Forest (the "Amended Plan").  Sino Forest intends to hold a meeting of creditors in respect of the Amended Plan on November 29, 2012 (the "Meeting").  Further information concerning the Meeting and the Amended Plan will be made available in meeting materials, which include a meeting information statement (the "Information Statement") concerning the Amended Plan that will be mailed to creditors this week.   A supplement to the Information Statement containing certain additional information will be mailed to creditors in advance of the Meeting.

The Amended Plan is the result of extensive arm's length negotiations between counsel to SFC, counsel to the Board, and the advisors to an ad hoc group of the Company's noteholders.  The Monitor and its counsel have also been involved throughout the course of negotiations.

After careful consideration of all relevant factors relating to the restructuring and the Amended Plan, and after receiving the advice of its advisors, the Company's management and advisors and having regard to the views of the Monitor, the Board of Directors has determined, in its business judgment, that the transactions contemplated by the Amended Plan are in the best interests of the Company and recommends that affected creditors approve the Amended Plan.

Consistent with the agreement with an ad hoc committee of its noteholders (the "Initial Consenting Noteholders") announced by Sino-Forest on March 30, 2012, the Amended Plan provides for a restructuring transaction (the "Restructuring Transaction") under which Sino-Forest would transfer substantially all of its assets, other than certain excluded assets, to a newly formed entity ("Newco") to be owned by the "Affected Creditors" of Sino-Forest.  The class of Affected Creditors includes Sino-Forest's current noteholders and certain other creditors of Sino-Forest, and excludes unaffected claims, equity claims, related indemnity claims, subsidiary intercompany claims, and certain other claims.  The assets transferred to Newco pursuant to the Restructuring Transaction would include all of the shares of the Company's directly owned subsidiaries which own, directly or indirectly, all of the business operations of the Company including Greenheart Group Limited.  The assets transferred to Newco would not include, among other things, certain litigation claims of the Company against third parties which would be transferred to a litigation trust (the "Litigation Trust") to be established to pursue such claims on behalf of the Affected Creditors and certain other stakeholders, and cash in an amount to be agreed to fund the Litigation Trust.

Generally, the Amended Plan provides for the treatment of claims as described in Schedule "A" to this press release.  Further information regarding the treatment of claims and the other terms of the Amended Plan will be available in the Information Statement and in the Amended Plan itself.  Certain of the terms of the Amended Plan are materially different from the terms of the Restructuring Transaction announced by the Company on March 30, 2012 and the draft plan of compromise and reorganization filed by the Company with the Court in August, 2012.  The Support Agreement has also been amended to, among other things, extend the outside date for implementation of the Plan to January 15, 2013.

In order to be effective, the Amended Plan must be approved by a majority in number of Affected Creditors with proven claims, and two-thirds in value of the proven claims held by the Affected Creditors, in each case who vote (in person or by proxy) on the Amended Plan at the meeting of Affected Creditors.  The Amended Plan is also subject to the approval of the Court and to numerous conditions precedent which must be satisfactory to the Company and the Initial Consenting Noteholders, as well as receipt of any necessary regulatory approvals in People's Republic of China and Canada.  If requisite approvals are received within the time frames anticipated, Sino-Forest intends to complete the Restructuring Transaction not later than January 15, 2013.

This press release summarizes only certain terms of the Amended Plan and does not, and is not intended to, contain a description of all of the material terms of the Amended Plan.  A full copy of the Amended Plan and the Information Statement for the Meeting will be available on the Monitor's website at http://cfcanada.fticonsulting.com/sfc, the Company's website at www.sinoforest.com, and filed on SEDAR at www.sedar.com.

On October 10, 2012, the Ontario Court of Appeal granted leave to certain parties involved in the CCAA proceedings to appeal the Court's decision on an "equity claims" motion. The appeal is scheduled to be heard on November 13, 2012. The Court of Appeal has directed that the Meeting not be held pending decision on appeal. While it is expected that the Court of Appeal will issue its decision prior to the Meeting, there can be no assurance that will in fact occur. Accordingly, the Meeting may be postponed.  In addition, there may be amendments to the Amended Plan resulting from the Court of Appeal's decision.

Sino-Forest continues to be subject to a cease trade order of the Ontario Securities Commission which prohibits trading in Sino-Forest's securities.

This news release contains forward-looking information within the meaning of applicable securities laws ("forward-looking statements"), including forward-looking statements relating to: Sino-Forest's expectations with respect to timing of the meeting of Affected Creditors to consider the Amended Plan; the Board of Directors' beliefs regarding the Amended Plan; the Company's expectations regarding the proposed Amended Plan involving the Company and the expected terms of, treatment of claims under and consideration payable pursuant to such Amended Plan; and Sino-Forest's intentions with respect to the timing of completion of the Restructuring Transaction. The forward looking statements expressed or implied by this news release are subject to important risks and uncertainties. When used in this news release, the words "intends", "believes", "will, "would", "expected", and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate in the circumstances. The results or events predicted in these statements may differ materially from actual results or events and are not guarantees of future performance of Sino-Forest. Factors which could cause results or events to differ from current expectations include, among other things: Sino-Forest's ability to complete the Amended Plan in the time period contemplated, if at all, which is dependent on its ability to comply with the closing conditions to the Amended Plan, many of which are significant and beyond the control of Sino-Forest, including the approval of the Court, the Company's creditors and securities and other regulatory authorities; the outcome of the appeal of the "equity claims" motion; orders of the Court in the CCAA proceedings; actions taken against the Company by governmental agencies and securities and other regulators; actions taken by the Company's noteholders, lenders, creditors, shareholders, and other stakeholders to enforce their rights; actions taken by the Monitor; the outcome of examinations and proceedings currently underway by law enforcement and securities regulatory authorities; the outcome of class action or other proceedings which have been or may in future be initiated against the Company; the Company's ability to continue to operate without former senior management, almost all of whom have ceased to employed by the Company; the Company's ability to acquire rights to additional standing timber; the Company's ability to meet its expected plantation yields; the cyclical nature of the forest products industry and price fluctuation in and the demand and supply of logs; the Company's reliance on the relationship with local plantation land owners and/or plantation land use rights holders, authorized intermediaries, key customers, suppliers and third party service providers; the Company's ability to operate its production facilities on a profitable basis; changes in currency exchange rates and interest rates; the evaluation of the Company's provision for income and related taxes; economic, political and social conditions and government policy in the People's Republic of China, the Republic  of Suriname and New Zealand; and other factors not currently viewed as material that could cause actual results to differ materially from those described in the forwarding-looking statements. Sino-Forest Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Schedule "A"

Generally, the Amended Plan provides for treatment of claims as follows:

• Claims of Current Noteholders and Other Affected Creditors. Noteholders and other Affected Creditors of Sino-Forest with proven claims would receive their pro rata share of 92.5% of the shares of Newco to be issued upon implementation of the Amended Plan, 100% of new notes to be issued by Newco in the aggregate principal amount of $300 million and a 75% interest in the Litigation Trust. Noteholders that became parties to the Support Agreement on or before the early consent deadline of May 15, 2012 (or their assignees) would receive the remaining 7.5% of the shares of Newco to be issued upon implementation of the Amended Plan. The general terms of the Newco shares, the Newco notes and the Litigation Trust interests are described in the Information Statement, and further details will be provided in a supplement to the Information Statement to be issued no less than seven days in advance of the Meeting.
• Shareholder and Shareholder Class Action Claims.  The Amended Plan does not provide for any recovery for current shareholders in their capacity as such.  However, to the extent that current shareholders are within the class of claimants in the shareholder class actions involving the Company, the Amended Plan preserves their ability to continue their claims against third party defendants, being any defendant other than the Company, its subsidiaries and certain of its directors and officers. Sino-Forest's existing shares would be cancelled as part of the Amended Plan.
• Indemnity Claims against Sino-Forest in respect of Shareholder Class Action Claims.  All indemnity claims against Sino-Forest in respect of shareholder class action claims against Sino-Forest (including indemnity claims against the Company by auditors, underwriters and directors and officers) would be released and would receive no recovery.
• Claims of Former Noteholders. Class action claims of former noteholders of Sino-Forest against Sino-Forest and certain directors and officers will be released. Claims of former noteholders against certain third parties will be allowed to proceed subject to a limited claim amount that can be asserted in respect of such claims that are indemnifiable by Sino-Forest, which amount shall be acceptable to the Company, the Initial Consenting Noteholders, the Monitor and counsel to the class action plaintiffs.
• Indemnity Claims against Sino-Forest in respect of Class Action Claims by Former Noteholders.  Valid indemnity claims against Sino-Forest in respect of class action claims by former noteholders will be allowed on a contingent basis, subject to the same limit as applies to the underlying claims of former noteholders. However, nothing in the Amended Plan impairs the ability of the Company, the Monitor and the Initial Consenting Noteholders from seeking a court order that would cause such indemnity claims to be disallowed or subordinated in the same manner as indemnity claims in respect of Shareholder class action claims.
• Unaffected Claims. Certain other claims are "unaffected claims", and holders of those unaffected claims will not be entitled to vote on the Amended Plan.  Holders of unaffected claims will be paid in full. Unaffected claims include: certain government priority claims relating to taxes, if any; certain employee priority and other employee claims, if any; and trade payables incurred by Sino-Forest after March 30, 2012.
• Directors and Officers. The Amended Plan provides for releases in favour of certain parties, including the current directors and officers of SFC as well as certain former directors or officers (collectively, the "Named Directors and Officers").  However, certain types of claims would not be released pursuant to the Amended Plan, including: (a) claims not permitted to be released by section 5.1(2) of the CCAA; (b) claims for the tort of civil conspiracy (which claims would be limited to the available insurance in respect of the Named Directors and Officers) and (c) claims for fraud or criminal conduct.  The Amended Plan does not provide releases for any of the respondents to the Ontario Securities Commission enforcement proceedings in respect of non-monetary claims. As noted above, the third party defendants to the class action claims that are proceeding would not be released under the Amended Plan, other than the Named Directors and Officers to the extent noted above.

The foregoing is a summary only of certain terms of the Amended Plan and is not, and is not intended to be, a description of all of the material terms of the Amended Plan

SOURCE: Sino-Forest Corporation

Inquiries

All inquiries regarding the Company's proceedings under the CCAA should be directed to the Monitor, FTI Consulting, via email at: [email protected], or telephone: [phone].  Information about the CCAA proceedings, including copies of all court orders and the Monitor's reports, are available at the Monitor's website http://cfcanada.fticonsulting.com/sfc.