Open Forum: Which plan for the future of Pacific Lumber Co.? Conservation, jobs and the environment by Pete Wilson, former governor of California
The San Francisco Chronicle
April 2, 2008
Beginning next week, a U.S. Bankruptcy Court in Corpus Christi, Texas, will review the five competing plans for the future of Pacific Lumber Co., Scotia Pacific and, in a larger sense, the North Coast economy.
As of last week, I have agreed to serve as the plan agent for Scotia Pacific, if its reorganization plan is approved by a bankruptcy judge. That means, in effect, I will serve as chairman of the company, with the authority to manage these 210,000 acres of timberlands.
Three of the plans have been put forward by Maxxam, the Texas holding company that owns and operates Pacific Lumber Co. and successor companies. I believe all three of these plans have significant flaws that could lead to dismemberment of the timberlands. The highly leveraged nature of these proposals, combined with issues that have already engendered local controversies, promise the continuation of the conflicts that have plagued the companies to date.
The other two are the Indenture Trustee plan, which I support, and the proposal from Marathon, a hedge fund, and Mendocino Redwood Co., a redwood lumber company.
First, a little history. Scotia Pacific – formerly a part of Pacific Lumber – started in Humboldt County in 1863 during the Civil War. During my tenure as governor, I forged with Sen. Dianne Feinstein and the federal government an agreement to purchase and protect the Headwaters Forest, a forest once owned by Pacific Lumber. Pacific Lumber, following its takeover by Maxxam Corp., had doubled its previous harvest levels in order to pay off the takeover debt and was threatening to increase logging of more old-growth stands.
The Headwaters Agreement – which included the purchase of 7,500 acres of old-growth forest and the conservation measures for the remaining 210,000 acres – was a step toward seeking a balance in the forest industry jobs versus environmental concerns. This agreement is now threatened.
After the agreement, Maxxam partitioned Pacific Lumber Co. into several companies – the timberlands going to a newly formed Scotia Pacific, and the mill, Town of Scotia, and other assets remaining with a much reduced Pacific Lumber. These two, along with their smaller sister companies, are now bankrupt.
All Californians should care because we all have a stake in the final outcome: Whether the companies that come out of the proceedings retain the commitment to the environmental obligations of the Headwaters Agreement, whether those new companies will have the resources to uphold those obligations, and whether those new companies will survive and continue providing the good-paying jobs that have sustained generations on the North Coast.
The Marathon/MRC plan promises a sustainable approach to the timberlands, but it secures those promises through a significant undervaluation of the assets and a proposed seizure of the Scotia Pacific assets.
The plan offered by the Indentured Trustee – the bondholders for the Scotia Pacific timberlands – retains Scotia Pacific as a single company, and requires that it be offered for sale as a single package, rather than dismembered, as proposed in the Maxxam plans.
This plan provides full commitment to the habitat conservation plan and other local, state, and federal environmental obligations. This plan sustains jobs in the North Coast. If accepted by the bankruptcy judge, Charles Hurwitz, the CEO of Maxxam will no longer be in charge of the company.
This plan has already sparked interest among three investor groups in the $550 million to $600 million-range – more than the valuation of the business put forth by the Marathon/MRC plan. These investor groups are well aware of the environmental obligations they must take on, and include a group led by The Nature Conservancy and Save-the-Redwoods League.
Based on my decades-long involvement in the North Coast timber issues, I believe I can help lead Scotia Pacific in directions that will benefit the state and local economies, preserve our critical forest lands, and maintain a resource for our grandchildren and their children.
Seeking the governor’s blessing
Proponents of each of the five competing reorganization plans for Pacific Lumber Co. are competing for an edge in the U.S. Bankruptcy Court hearings. In January, Gov. Arnold Schwarzenegger submitted a letter to the Texas court asking that whichever plan was selected would adhere to five principles. Creditors are expecting the governor to submit another letter on Friday, April 4, that anoints one plan over the others. To read the first letter, go to sfgate.com/opinion
Pete Wilson is the former governor of the State of California.
This article appeared on page B – 7 of the San Francisco ChroniclePosted in PALCO | Tagged HRC, MRC |