Creditors seek to halt timber takeover plan – Parties favor asset auction to recoup nearly $800 million owed
By Mike Geniella
Santa Rosa Press Democrat
July 23, 2008
Bankrupt Pacific Lumber Co., which has one remaining lumber mill in Scotia, still owes its major creditors nearly $800 million following the financial collapse of the North Coast’s oldest timber company. Photo by Kent Porter
Lumber Mill Deal
The $530 million reorganization plan proposed by Ukiah-based Mendocino Redwood and Marathon Structured Finance could proceed as early as Monday if the Louisiana court declines to intervene.
Mendocino Redwood will acquire Pacific Lumber’s 210,000 acres of timberlands and its Scotia milling complex.
A new company will be formed
called Humboldt Redwood Co.Major creditors of bankrupt Pacific Lumber Co. Tuesday asked a federal court in Louisiana to block a planned takeover next week of the North Coast’s best-known producer of redwood lumber products.
The Bank of New York Mellon Trust Co. and other lenders would have to settle for up to $200 million less if a joint venture proposed by Mendocino Redwood Co. and an East Coast hedge fund succeeds.
The creditors are owed nearly $800 million following the implosion of the North Coast’s oldest timber company. They favored an auction of Pacific Lumber’s timber assets, arguing the Mendocino Redwood plan undervalued the company.
In U.S. District Court filings in New Orleans, attorneys for the Bank of New York argued that issues surrounding the high-profile Pacific Lumber case are of “national significance to the commercial lending community and the bankruptcy bar.”
The creditors are seeking an emergency order to stop the sale, pending an appeal that could take up to two years.
High-profile parties attracted by Pacific Lumber’s prized assets during 18 months of contentious bankruptcy have included Harvard University’s Endowment Fund, the nation’s largest, and Red Emmerson, California’s largest timberland owner.
But a $530 million reorganization plan proposed by Ukiah-based Mendocino Redwood and Marathon Structured Finance ultimately won a federal bankruptcy judge’s approval. The deal would be consummated as early as Monday if the Louisiana court declines to intervene.
Under the plan, Mendocino Redwood will acquire Pacific Lumber’s 210,000 acres of timberlands and its Scotia milling complex. A new company, called Humboldt Redwood Co., will be formed.
In anticipation of the takeover, Mendocino Redwood representatives are meeting individually this week in Fortuna with 250 remaining Pacific Lumber employees.
Marathon, a New York investment group, will own and operate the town of Scotia. The historic company-owned community was put up as collateral by Pacific Lumber to secure a $175 million loan. Marathon proposes to continue Pacific Lumber’s efforts to sell the town’s 200 company-owned homes to residents, and either develop or sell commercial properties in Scotia, Fortuna and Carlotta.
The Mendocino Redwood and Marathon venture won final approval from a federal bankruptcy court judge in Texas earlier this month.
Mendocino Redwood is owned by members of the Fisher family, the San Francisco clan that built The Gap chain of clothing stores. Mendocino Redwood was formed 10 years ago after acquiring 225,000 acres of Mendocino County timberlands and a Ukiah sawmill.
Pacific Lumber President George O’Brien said in a memo to employees that the likelihood of disgruntled lenders being able to block the takeover “looks increasingly remote.”
O’Brien said in view of that, “We are moving aggressively to assist Mendocino Redwood and Marathon in any way we can.”
“The good news is the company has a great future, and all of the uncertainty is nearly over,” O’Brien said.Posted in PALCO | Tagged HRC, MRC |