the town dandy / By Hank Sims

Out with a Bang

Timber noteholders.The holders of Maxxam’s timber bonds are principally composed of a conglomeration of Wall Street firms. They own over $700 million of the company’s debt, and are theoretically secured through a lien on its Humboldt County timber holdings. They have long signaled their intention to file a competing reorganization plan.

Though the final details have not yet become public, it would seem that the noteholders are looking at a parceling-out of Pacific Lumber assets. They have stated that they are in talks with the Nature Conservancy, and have said that the preservation outfit is interested in acquiring the “Ancient Forests” (though at a price nowhere near $300 million). Apparently, the rest of the assets would be sold to the highest bidder.

If the noteholders’ final plans do conform to this outline, they will likely dash the hopes of those who have held out for some sort of “community forestry”-based outcome. Local advocates of the community forestry model had reportedly been in talks with the noteholders, and seemed to think that they could find a place at the table for the future management of Pacific Lumber lands. But it would seem that the noteholders have little intention of holding on to the forest and managing it — which would only make sense, considering who they are.

Unsecured creditors.Though no details of the plan have yet come forth, it was announced at Friday’s hearing that the committee of unsecured creditors intends to file its own recovery plan. The committee represents those who were owed money by Pacific Lumber or one of its sister companies at the time of bankruptcy, but who have no collateral.

Mendocino Redwood Company.Marathon Asset Management is owed about $160 million, which is secured by assets belonging to Pacific Lumber proper (not the timberlands). In court papers filed last week, it signaled that it would be filing a reorganization plan that would keep Pacific Lumber assets intact, as a working timber company.

Marathon said that it would partner with Mendocino Redwood Company, which came into being when the family that built The Gap’s clothing empire bought Mendocino and Sonoma county timberlands from Louisiana Pacific. Mendocino Redwood now has 230,000 acres. It doesn’t harvest old growth trees, and it uses a minimum of clear-cutting. Its products are certified by the Forest Stewardship Council, which, though not completely uncontroversial, is the greenest of the various programs for “green” forestry certification.

When the Jan. 30 deadline comes and all the plans are in, there will be a period of jockeying. Determining which plan is chosen involves a complicated voting procedure amongst the parties. Since the noteholders own the bulk of the debt, they seem to be in the driver’s seat. But whatever the case, come April Pacific Lumber will be a very different company, and Humboldt County will be a substantially different place.

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