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| Voice of the Environment's mission is to educate the public regarding the transfer of public trust assets into private, mostly corporate, hands. | ||
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Ukiah office: 1330 Boonville Rd Ukiah, CA 95482 707-467-0329 |
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Marin office: 270 Beach Rd Belvedere, CA 94920 415-435-2007 |
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| For two decades, Voice of the Environment has stood up for the people and our communities against the avarice of corporations and the misguided policies of the corporate-dominated state. |
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Print This Article Wednesday, August 3rd, 2005 Pacific Lumber seeks deal to cut debt MIke Geniella/The Press Democrat (Santa Rosa) Citing a crushing debt load, Pacific Lumber Co. on Tuesday outlined a plan to seek bankruptcy protection while turning over controlling interest in its North Coast timberlands to anxious creditors. The company wants to give up 90 percent interest in its 217,000 acres of redwoods in return for bondholders agreeing to cut the current $705 million debt to $300 million. "We're willing to give up majority ownership in the timberlands to keep operating," Pacific Lumber spokesman Chuck Center said. Tuesday's developments are the most serious surrounding the financial fate of Pacific Lumber since it was acquired in 1986 by Texas financier Charles Hurwitz. The company controls the largest and most valuable stands of redwoods in the world along a slice of coastal Humboldt County where timber and environmental interests have clashed for two decades. The 136-year-old firm once was called the aristocrat of West Coast timber companies, lauded by the Save the Redwoods League among others for its conservative logging practices. But since Hurwitz bought it, Pacific Lumber has been engaged in a running battle with environmentalists and state and federal regulators over its sharply accelerated timber harvesting. This summer, Scotia residents learned that cash-strapped Pacific Lumber plans to sell the company-owned mill town's 270 homes to current occupants or outsiders. Pacific Lumber remains Humboldt County's biggest private employer with 800 workers, and it completed construction last year of a $30 million high-tech sawmill designed to process smaller logs and generate additional revenue. At the core of Pacific Lumber's financial problems is an inability to generate enough cash from lumber production to meet interest payments of more than $50 million a year on its debt. In July, the company scrambled to make a $27 million payment. A similar payment is due in January. Center said Tuesday that company executives still are "optimistic" they can negotiate a deal with the bondholders and avoid bankruptcy. "They know we can't make the current payments. They know we need to do something," Center said. In a filing late Monday with the federal Securities Exchange Commission, the company described a "potential restructuring plan to be accomplished through . . . a Chapter 11 plan of reorganization." Chapter 11 allows businesses to reorganize themselves, restructure debt and rewrite financial agreements. Typically, a business is allowed to continue to operate, although it does so under the supervision of a bankruptcy court judge. The disclosure was seen by some analysts Tuesday as a way of prodding creditors into negotiations rather than forcing the company to liquidate. "It might be more advantageous for the bondholders to take the 90 percent equity in the timberland and try to recover or at least maintain the value of their investment," said Matt Wirz, North American editor of the online publication DebtWire, which monitors financially troubled companies. At issue are bonds issued by a Pacific Lumber subsidiary, Scotia Pacific, which in 1998 used the company's timberlands as collateral for refinancing debt that totals about $705 million. Pacific Lumber separately owns lumber mills, marketing-related facilities and the town of Scotia. In a complex arrangement, Pacific Lumber is protected from Scotia Pacific creditors, while the two entities still are financially intertwined. "Scotia Pacific depends on Pacific Lumber to buy its logs so it can make interest payments. Pacific Lumber needs the logs to operate," Wirz said. Company executives have blamed Pacific Lumber's cash crunch on increasing state regulatory constraints on timber harvesting to protect fisheries and water quality. "We're in dire straights because of those actions," Center said. A state Water Resources Control Board analysis issued in late April blamed Pacific Lumber's predicament on the excesses of Hurwitz. The report concluded that Pacific Lumber has remained too heavily in debt during the nearly two decades the firm has been owned by Hurwitz's Maxxam inc. despite sharply accelerated logging. "None of the profits from accelerated harvesting has been used to pay off company debt. Instead, Maxxam has removed at least $724 million in profits for its own use," the state report concluded. Print This Article |
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Voice of the Environment is a 501 (c-3) not-for-profit Montana-based corporation formed in 1991.
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