Pacific Lumber, in conjunction with Maxxam, has now filed a proposed plan of reorganization. This begins a process to determine recovery from bankruptcy. As a service to the community, and in an effort to see the company successfully move out of bankruptcy in a sustainable manner, EPIC will regularly provide these updates.
ACTION: Please write a Letter to the Editor (see below).
Proposed Reorganization Plan also Seeks Highly Inflated Price for Old-Growth Groves
SUMMARY
In January, 2007, Pacific Lumber Company, its subsidiaries and newly created affiliates ("PL"), filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code in Corpus Christi, Texas.
Under Chapter 11, a debtor company is allowed an exclusive period of time to present to the Court a plan of reorganization. In an effort to control this process, Pacific Lumber has asked to extend this period of "exclusivity" until February of 2008. A hearing on whether this extension will be granted is scheduled for Tuesday, October 23. In the meantime, PL and Maxxam recently submitted to the Court a proposed Joint Plan of Reorganization, with a Disclosure Statement. A fundamental purpose of reorganization is to provide a feasible plan that ensures the future economic footing of a company while protecting its creditors.
To be economically viable, PL must implement a new era of ecologically sustainable forestry on its lands. To protect its creditors and workers, it must provide a realistic plan. The submitted plan fails on both accounts.
PL'S REORGANIZATION PROPOSAL INCLUDES:
* the conversion of some 21,800 acres of forestland to "Redwood Ranch Development," consisting of 160-acre parcels of high-end, "trophy" or "kingdom" properties "that will boast incomparable views," some adjoining and allowing access to protected old-growth groves;
* a proposal to sell, at vastly inflated prices, several old-growth groves known as "Marbled Murrelet Conservation Areas" ("MMCAs"), which are already protected by the PL Habitat Conservation Plan ("HCP") for 42 years against any activities detrimental to the murrelet;
* a proposal to finance this scheme through the issuance of new notes which, as with the Maxxam takeover in 1985, force the company debt on the resources, leaving the company even more vulnerable to economic failure than before;
* an infeasible proposal to pay all creditors in full, based on inflated revenues from the future development project and sale of old-growth groves; and
* other provisions regarding the disposition of company debt and the merger of PL, Scopac and other entities into one company.
The company wants to develop "kingdom" private properties right in the forested areas adjoining six of the eleven protected MMCAs, which PL refers to as "Ancient Redwood Groves." The surrounding development plan, in the words of the Disclosure Statement, is a "plan to unlock and monetize the high value of the Ancient Redwood Groves . . ." But these groves were not protected for the purpose of "unlocking and monetizing" their values, but rather for helping the marbled murrelet survive its current difficult "bottleneck" period in which its survival is threatened. The expected value of the nearby proposed Redwood Ranch Development is clearly tied to proximity to these protected groves.
The MMCAs were previously set aside under the Headwaters deal specifically to grow back additional habitat for the marbled murrelet over time. By referring to these groves as "Ancient Redwood Groves" PL artificially inflates their economic value, projecting an unrealistic $400 million dollar sale price. PL must find willing buyers for the MMCAs, whose protection will remain crucial for the marbled murrelet for the foreseeable future. The MMCAs, if sold, will still be subject to the HCP restrictions agreed to by the company and recorded as covenants to title. Missing from the proposal is, among other things, an understanding that private access to the MMCAs would be prohibited as an activity detrimental to the murrelet. Additionally, converting timberland for development requires regulatory relief, which cannot be presumed. Moreover, there is no indication in the plan that the new PL will harvest any more responsibly on its remaining acres than in the past.
The PL Plan is a giant step backwards - contrary to future recovery of a once great company and the rich environment that Maxxam's PL has mismanaged over the last 20 years. EPIC believes PL must be freed of Charles Hurwitz's corporate shell game and unsustainable level of debt leveraged against the timber. EPIC believes a plan can be developed which removes Maxxam and Hurwitz, protects and compensates creditors and workers, and commits PL to utilize actual sustainable practices. These practices include, at a minimum: protecting the resource base for future generations by sustainably harvesting timber, premised upon adequate measures to protect neighboring landowners, threatened species and their habitat, and the fragile soils and watersheds of the region. These important goals cannot be subordinated to a debt scheme designed to make financial success contingent on environmental destruction.
Rather than blame others for its problems PL should not repeat its mistakes. The new PL should not set itself up for failure by establishing unrealistic expectations for revenue generation and then push the envelope to reach those expectations. This is the scheme that placed the company in bankruptcy, and is the root of the devastating problems that have plagued the company ever since Charles Hurwitz took it over more than 20 years ago.
The Pacific Lumber proposed Reorganization Plan and accompanying map is available for downloading and viewing at:
http://asje.org/PL_Reorganization_Plan.html or at http://www.plbankruptcy.com
ACTION:
Write a Letter to the Editor to one or more of the publications below. Letters to the Editor are effective ways of letting media outlets know about public concerns, and are effective even if they do not get published. Published letters to the editor will help get out the critical message that these forestlands need long-term protection, not short-term liquidation!
Here are some suggested points to make. Add any concerns you may have. Please maintain a polite tone for maximum effectiveness.
* The new PL should be free and clear of any ownership, management, or involvement by Charles Hurwitz or any company directly or indirectly controlled by Charles Hurwitz.
* Pacific Lumber/Scopac timberlands need to be retained for ecologically sustainable forestry, and not converted to development. The proposed Redwood Ranch Development is not appropriate in the heart of Humboldt County's precious redwood forestlands.
* All marbled murrelet habitat should be protected, and the MMCAs should continue to receive at least the level of protection they have enjoyed under the HCP. The MMCAs or any old-growth forest must not be used as a scheme to boost the "development value" of neighboring lands.
* The marbled murrelet habitat in the Headwaters Preserve must remain fully protected without development along its southern border.
* Charles Hurwitz was able to remove valuable resources from Humboldt County because he structured the debt of the company to require the harvesting of timber to pay down the interest, while principal essentially remained unpaid over time. The plan for new notes ensures a repeat of this same problem. Liens on the timber itself should be held to an absolute minimum.
* The PL plan contemplates new notes worth $400 million secured by liens on the "Redwood Ranch Development" plan. These liens are not realistic, particularly because the plan 1) assumes that the Redwood Ranch Development will go forward, irrespective of the permitting requirements, and 2) would substitute one unrealistic debt scheme for another.
* Altogether, the PL plan proposes issuing some $780 million in new notes secured by liens on timber production and development. Rather than presenting a responsible plan to bring this company out of its catastrophic cycles of debt and forest destruction, and promoting sustainable resource management which protects the community, its workers and creditors, this plan only makes a bad situation much, much worse.
Address your letters to:
Eureka Times Standard:
http://www.times standard.com/writealetter
Letters to the Times Standard
P.O. Box 3580, Eureka, CA 95502 3580
Fax: 707 441 0501
Email: letters@times standard.com
The Eureka Reporter:
http://www.eurekareporter.com/Contact.aspx
E mail works best (editor@eurekareporter.com), but submissions can also be sent to:
Submissions c/o The Eureka Reporter
513 Second Street, Eureka, CA 95501
Submissions may also be faxed to: 707 476 8092.
North Coast Journal:
http://www.northcoastjournal.com/mailbox/
145 G St., Suite A, Arcata, Calif. 95521
Fax (707) 826 2060
THANKS and stay tuned!
