Maxxam Begins Final Liquidation of Once-Proud Pacific Lumber Company

The Humboldt Watershed Council announced today that it has confirmed a secretive move by Maxxam corporation to begin the long-predicted process of dividing and selling-off the remaining assets of once-proud Pacific Lumber Company. Some 75,000 acres have been quietly put on the market in recent weeks, comprising over a third of the company’s lands.

Maxxam Corporation is the parent company of Pacific Lumber (Palco), which in turn is the parent of Scotia Pacific (ScoPac.) Palco owns approximately 220,000 acres of once-might redwood forests in Humboldt County. Of that, 211,000 acres are held by its ScoPac subdivision as collateral for $867 million in bonds the company sold in 1998.

The Humboldt Watershed Council (HWC) was able to confirm late last week that Palco was offering 16 properties for sale, totaling 14,631 acres. The properties are mostly non-contiguous to the bulk of Palco’s lands, and range in size from 26 acres up to 3,795 acres. The properties are located all over Palco’s holdings, including Jacoby Creek, the Mattole, Kneeland, and Avenue of the Giants.

The Watershed Council has also received credible word that Palco is putting an additional 60,000 acres up for auction to other timber companies, though maps of these properties have yet been obtained.

The sale of these lands comes just as the company’s business plan approaches a long-predicted ‘jumping-off point’ for Maxxam. As far back as 2003, the Humboldt Watershed has publicly predicted a liquidation and sale of the company and its assets would occur by 2007-2008. HWC’s analysis was based on a review of the company’s own documents and records.

Mark Lovelace, President of the Humboldt Watershed Council, said that Palco’s harvest levels over the last 6 years have been within 2% of the company’s business plan (see below.) Lovelace also pointed out that ScoPac’s log sales to Palco this year have been higher than in any of the past 4 years.

“Clearly, if there is any problem with the company’s finances, it cannot be blamed on a reduced rate of harvest, because they are right on target,” said Lovelace.

The majority of the lands being offered are held by ScoPac, though a few small pieces are held by Palco. Scopac owns the timber rights on all of the lands. Because of this, virtually all of the profits from any sale will have to go to the ScoPac bondholders, to pay off the company’s massive debt. The bondholders were not consulted with or contacted in any way by ScoPac, Palco, or Maxxam before putting these lands on the market.

“This is certainly in keeping with this company’s standard operating procedure,” said Lovelace. “Doing the right thing for their neighbors has never been a concern. Why should they care about their creditors? Anyone who seeks to do business with this company on these lands should proceed with extreme caution.”

Lovelace noted that the company’s lands are extremely cut over, with very little merchantable timber. A disclosure released by ScoPac late last year showed that 84% of the company’s lands contained an average of just 12,750 board-feet of timber per acre, less than 1/6 of what a healthy second-growth redwood forest should hold.

Lovelace also cautioned any prospective buyers that Palco’s Habitat Conservation Plan (HCP) goes with the land, and prevents any conversion. The lands must be managed according to the HCP for the life of the agreement.

“There are lots of restrictions, there’s not much timber, and they can’t be converted,” said Lovelace. “Let the buyer beware.”

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Palco harvest levels, 2000 through 2006

Actual Log Sales in mmbf:
2000 153.40
2001 167.90
2002 178.60
2003 166.30
2004 144.10
2005 145.00 (ScoPac est)

Actual average harvest level, 2000 through 2005
159.20 mmbf

Target average harvest level through 2007
(from ScoPac 1998 Bond Memo)
162.27 mmbf (Palco equivalent)

Amount below plan:
-1.9%