December 21, 2007
Mendocino Redwood Co. has joined key Pacific Lumber Co. creditor Marathon Structured Finance Fund to support a reorganization plan it says would be superior to any other alternative.
Mendocino Redwood is prepared to put up $200 million for new equity, according to documents filed Thursday by Marathon in the U.S. Bankruptcy Court in Corpus Christi, Texas.
Family-run Mendocino Redwood owns 230,000 acres and is widely considered an environmental steward. It is certified by the Forest Stewardship Council, a third-party certification entity with worldwide support from environmental groups.
Marathon is urging Judge Richard Schmidt to reject both Palco's restructuring plan based on the sale of 22,000 acres for exclusive 160-acre ranchettes and other lands, and the largest timber noteholder's plan to hold a quick sale of the company's lands.
"Instead, Marathon will propose a plan that offers the court a much more favorable outcome, and, hopefully, the path to a consensual joint plan of reorganization for all debtors," reads Marathon's request to end Palco's exclusive right to propose a plan.
The success of Mendocino Redwood -- whose Mendocino Forest Products also operates a sawmill in Ukiah -- sets it apart from the other parties in the Chapter 11 case, Marathon says.
Marathon and Mendocino Redwood would reorganize Palco's timberland operations and the Scotia sawmill into a single operating entity. Its plan is to:
* Make a cash payment of $175 million to the noteholders plus a new note of $325 million secured by the same collateral.
* Convert or pay Marathon's and other debt.
* Distribute to unsecured creditors as described in the term sheet between the Official Committee of Unsecured Creditors and the noteholders, including payment of up to $8 million, assumption of the debtors' pension obligations, and distributions from proceeds received from the debtors' litigation assets, which will be assigned to a litigation trust.
This benefits all creditors, Palco's employees and the residents of Scotia, Marathon maintains, as well as the residents of Humboldt County.
Times-Standard to provide access to Palco hearing
The Times-Standard will host by teleconference the Pacific Lumber Co. hearing in U.S. Bankruptcy Court in Corpus Christi, Texas, today.
Among the most important items on the agenda are whether to allow Palco's reorganization plan to be the only plan to go forward, or whether to allow its creditors a chance to file their own plan. Mediation broke down last week between the parties.
The court will also hear arguments on whether to begin hearings on the value of Palco's assets, a key factor in whether parent company Maxxam Inc. remains in control of the company.
The hearing begins at 8 a.m. Come to the Times-Standard newsroom's conference room on the second floor at 930 6th St. in Eureka.