Mendocino Humboldt Redwood Company, LLC


Mendo Redwood woos Fortuna on Palco

By Thadeus Greenson
March 16, 2008

Top brass from the Mendocino Redwood Co. received a warm welcome Saturday in Fortuna.

The company’s chairman, Sandy Dean, walked a crowd of about 150 through the company’s proposal to reorganize the bankrupt Pacific Lumber Co.

Dean explained that, in partnership with Marathon Structured Finance Fund, Palco’s main creditor, Mendocino Redwood Co.’s proposal includes investing $7.5 million into the Scotia sawmill and continuing timber operations on Palco’s 210,000 acres in Humboldt County. Dean also repeated Mendocino Redwood’s pledge to seek certification through the Forest Stewardship Council, eliminate traditional clearcutting practices and reduce logging overall.

“We’re looking to set a level of harvest here in a manner that can be sustained, and ultimately increase a little bit,” Dean said.

Most in the crowd seemed supportive, and gave the company’s representatives a hearty round of applause after they spent more than an hour answering questions from the audience.

Palco employee Gary Ogden said he’d read about Mendocino Redwood’s plan, but wanted to hear the company’s executives explain it in person.

“Sometimes when you hear them and see them, you get a feel for their management style,” Ogden said, adding that he liked what he heard and saw.

Just as the crowd learned a bit about the newest player in the Palco bankruptcy hearings, Mendocino Redwood’s top officials learned something about Humboldt County — after their flight into town was severely delayed by fog.

“I apologize for being late,” Managing Director Gary Lembo told the crowd after arriving well into Dean’s presentation, “but, as you know, flying in here there are no guarantees.”

A cornerstone of Mendocino Redwood’s presentation Saturday was to court the votes Palco’s unsecured creditors (ex-employees and businesses still awaiting payments from the bankrupt company) who have a vote in the reorganization process.

Dean said Mendocino Redwood’s proposal includes $10.6 million in cash to be used for payouts to those unsecured creditors, and estimated that they would receive 75 to 90 percent of the money currently owed to them by Palco.

Steve Will, who sits on the Committee of Unsecured Creditors, said Mendocino Redwood’s proposal had won the endorsement of the committee.

“For them to step up and say they were going to take care of the retirees was really important to me,” Will said. “There are guys who have given their lives to this company.”

Unsecured creditors have until March 25 to cast their ballots, which Dean said are available by calling (800) 224-7654, for those who didn’t receive them in the mail or wish to change their vote.

Many current Palco workers in the crowd asked Dean questions about how Mendocino Redwood’s pay and benefits packages would stack up against Palco’s, questions Dean said he couldn’t answer completely at this time.

“We think on wages and bonuses we are competitive with the market,” Dean said, adding he couldn’t go into specifics at this stage. “On benefits, we believe (Mendocino Redwood) is above the market.”

Others in the audience asked if Mendocino Redwood would work with local contractors.

“We know there are really well qualified people up here,” Mendocino Redwood CEO Richard Higgenbottom told the crowd, assuring that the company would hire local whenever possible.

Others expressed worries about what the transition process would look like if Mendocino Redwood took over, and how long the Scotia mill might be dark. Higgenbottom said the company would do everything possible to make the transition as seamless as possible.

Dean said the company’s whole make up, from its no-clearcutting policy to its hiring practices, is geared toward long-term success.

“We try to make decisions that reflect the fact that we expect to be members of the community for a long, long time,” Dean said.

That point was also trumpeted by Will, who said Mendocino Redwood’s proposal to infuse cash into the company and reduce debt would be good for its long-term viability.

“I thought that was real important for the future of this community — for our kids and grand kids,” Will said.

Bryan Connors, who worked for Palco until being laid off in December of last year, said he generally liked what he heard from Mendocino Redwood.

“But that’s their job,” he was quick to add. “They have an agenda to push, and that’s what they did.”

The company will hold another town hall meeting at 2 p.m. Tuesday at Eureka’s Wharfinger Building.

On the Web: Complete audio recordings of the Fortuna meeting will be available at on Tuesday.

Thadeus Greenson can be reached at 441-0509 or

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