Letter to the editor of the Times-Standard: Indenture Trustee plan best for Palco (author: Pete Wilson, former California Governor)
April 1, 2008
Currently, there is activity affecting you occurring in Corpus Christi, Texas — more than 2,100 miles distance and a world away from California’s pristine North Coast. A United States Bankruptcy Court is reviewing plans to determine the future of the Pacific Lumber Co., Scotia Pacific, and possibly the economic stability of the region.
For this reason, I have agreed to assume the position of Plan Agent under a reorganization plan for Scotia Pacific Co. proposed by the Indenture Trustee for public noteholders who have invested more than $800 million in the timberlands.
This plan is one of five competing plans submitted by various parties for the reorganization of the bankrupt successor companies to Pacific Lumber. To simplify the lawyer-speak, I will in effect serve as chairman of the company, with the authority to manage these 210,000 acres of timberlands and other property during the reorganization process.
Of the five current plans in front of the bankruptcy judge, three have been presented by Maxxam, the Texas holding company that owns and operates Pacific Lumber and its successor companies in Humboldt County.
I believe all have significant flaws that could lead to dismemberment of the timberlands. The highly leveraged nature of these proposals combined with issues that have already stirred local controversy promises the continuation of the conflicts that have dogged the orderly fulfillment of the environmental obligations and their promise of sustainable jobs in the region.
The fourth plan is a proposal by Marathon, a hedge fund that has partnered with Mendocino Redwood Co. (MRC). While this plan promises a sustainable approach to the timberlands, it secures those promises only through a significant undervaluation of the assets and a proposed seizure of the Scotia Pacific assets from the public noteholders. This course of action by Marathon puts the plan in serious jeopardy of being unapprovable by the judge.
Another critical issue for me concerning Marathon/MRC is their previously made claims about being the plan that best protects jobs in the region. Recently, Marathon has begun stepping away from this commitment.
Just last week, the Times-Standard reported that MRC Chairman Sandy Dean now admits that their plan will cut Palco jobs at least by 100 employees — and I believe that number could be substantially higher. This plan also requires the unsecured creditors — largely the local mom-and-pop service and supply businesses — to accept less than full payment for money rightly owed to them.
The fifth and final plan is the Indenture Trustee plan — the one I have elected to support. I agreed to take on this challenge in large part due to my nearly 30 years of active engagement in California’s timber and other contentious resource management issues and due to the critical importance this issue has in the lives and economy of the region.
The plan offered by the Indenture Trustee on behalf of the public noteholders for the Scotia Pacific timberlands is superior in many respects. This plan retains Scotia Pacific as a single company, and requires that it be offered for sale as a whole. The plan will not dismember the company, as proposed in the Maxxam plans.
This plan provides full commitment to the habitat conservation plan and other local, state, and federal environmental obligations. The public noteholders have specifically negotiated language with the state Resources Agency lawyers that will control the operation of the company during the reorganization process and bind any purchaser of the assets.
The Indenture Trustee plan sustains jobs in the North Coast. The plan guarantees all existing jobs at Scotia Pacific for a year, except for the top management.
If the plan goes into effect, Mr. Hurwitz will no longer be in charge of the company. Sale of Scotia Pacific also requires the new owner of the timberlands to provide a guaranteed log supply contract to Scotia mill.
I have a track record concerning timberlands and job protection on the North Coast. Many readers will recall the historic partnership I forged with Senator Feinstein and the federal government to purchase and protect the Headwaters Forest. This agreement also included a precedent setting habitat conservation plan instituting sustainable management practices for the Scotia Pacific timberlands.
My record of performance is one of making good on these assurances which are so important to the environmental and economic health of the North Coast.
The California North Coast environment and culture is special, unique and should be protected and enhanced. Just as it is important to preserve our natural resources, it is equally important to preserve our human resources. Men and women of the North Coast need jobs today and job opportunities for their children and grandchildren tomorrow.
The resources need continued stewardship to protect and preserve the local environment. The region needs continued significant investments in its businesses and economy. Further, we need to resist efforts — some with the best of intentions — that may undermine investments in the region and its economy.
The plan I am leading proposes to do just that. My record on conservation and jobs demonstrates my commitment to make that plan fulfill its promises to the people of the North Coast.
Former California Gov. Pete Wilson has been selected to manage Scotia Pacific reorganization. He resides in Sacramento.Posted in PALCO | Tagged HRC, MRC |