After nearly two decades of destructive and unsustainable logging, driven in part by the need to make the interest payments on its crippling debt, Pacific Lumber (PL, PALCO, and its affiliate ScoPac) filed for Chapter 11 bankruptcy protection in January 2007. In October PALCO presented its strategy for continuing operations to the US Bankruptcy Court in Corpus Christi, Texas. In an effort to repay its creditors PL proposes to: take on even more debt, subdivide and sell valuable forestland, and double its income.
PL proposes to raise 1.3 billion dollars based on inflated values from the following land sales:
Property..................................................Acres......Per.Acre.....Alleged Value
Marbled Murrelet Conservation Areas....6,600.......$60,600.......$400,000,000
Redwood Ranch Subdivision.....................21,760........35,780..........780,000,000
Company Town of Scotia............................n/a..............n/a................75,000,000
Hole in the Headwaters..............................1,395........25,800.............36,000,000
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The prices presented by PALCO in its reorganization plan are severely overvalued according to numerous sources . As reported in the Times-Standard on October 11, 2007:
"... Howard and Zukin Capital--consultants for the group that holds $714 million in notes secured by 210,000 acres of timber--estimates the [PALCO] land is worth between $290 and $500 million. Some 6,660 acres of land off-limits to protect the threatened marbled murrelet are worth between $10 and $20 million". This independent valuation is 25-40% of the $1.3 billion espoused by PL.
The Redwood Ranch Development envisioned by PL would subdivide forestland into 160-acre parcels of "trophy residential developments" or "kingdoms" adjacent to Headwaters Forest and Marbled Murrelet Conservation Areas. The company claims that each of the 136 parcels to be created would "boast incomparable views, and some of the parcels would have access to the Ancient Redwood Groves." PALCO's claims about the benefits of bringing wealthy residents into the County through these "kingdom" homes did little to appease Humboldt County Supervisors who immediately placed a moratorium on home-building on TPZ (timber-production-zone) land.
Furthermore, PALCO claims to have a 50-year timber harvest plan on its remaining 181,000 acres of timberlands that are at or below legally permissible harvest rates. However, the company's own filings show that they have been logging within 2% of their planned harvest rate throughout the past 6 years. PL also projects doubling revenues from 2008 to 2009 by the reintroduction of a second shift at their lumber mill. The Reorganization Plan does not explain how the anticipated doubling of revenue will be realized after reorganization; is it the doubling of harvest rates or a steep increase in timber prices, or some other factor?
The Bank of New York, as court trustee for the bankruptcy proceedings, responded immediately to PL's plans:
"... the Debtor's [PL] Plan should not and will not be confirmed for the following essential reasons:"
(Excerpts...)
* "The Debtors' claim that their assets have a total present value of $1.4 billion is completely unreasonable
* "The Debtors' Plan is not feasible. Scopac's bankruptcy case was commenced because it was unable to service the annual interest payments of $56 million on the approximately $715 million of principal owed on the Timber Notes. Under the Debtors' Plan, the Debtors will emerge from bankruptcy with approximately $1.1 billion in total debt, over $200 million more than when they started their cases, subject to interest rates higher than those they could not afford to pay pre-petition, without any significant improvement in the lumber markets, the regulatory environment or the Debtors' timber operations."
* "the Redwood Ranch project requires numerous changes in law that are not likely to occur."
* "The Redwood Ranch residential redevelopment... has no realistic possibility of ever being completed... For example, the Humboldt County Planning Commission called an emergency meeting after reviewing the Debtors' Plan and passed, on October 9, an Ordinance ordering a moratorium on the issuance of building permits on timberlands. This Ordinance makes extensive findings that Debtors' proposed Redwood Ranch development is not in the public interest."
The Bankruptcy proceedings continue in Corpus Christi, Texas.
For more information, the Alliance for Sustainable Jobs and the Environment has posted the entire Reorganization Plan, at www.asje.org
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TOC for Forest & River News, Winter 2007