from the Bay Area Coalition for Headwaters
May 3, 2008

For those of you following the unfolding drama of the Pacific
Lumber bankruptcy story, there is much to report, but it’s not
over yet. After this week’s proceedings in Corpus Christi court,
resolution is still at bay, but things are evolving faster and
bit more furiously than in previous months. A decision regarding
management of the company and its redwood holdings is close.

For now, I will let a fairly comprehensive news clip and the blog
of court observer (and Humboldt county resident and Community
Forestry Team member) David Simpson suffice, since your loyal
author of these updates is on the road. While there are
interesting (and scary) entities elbowing their way into the court
proceedings of late, like Red Emmerson of Sierra Pacific Co.
infamy, and other potential large investors, the only
reorganization proposals that have legal standing before the
bankruptcy court are the risky auction proposed by the Noteholders
and the Marathon/Mendocino Redwood Co (Fisher family) proposal.
Recent developments include the endorsement of Marathon/MRC’s plan
by the debtor, Pacific Lumber. (See previous BACH updates
current BACH newsletter

for details)

The next time the case will be heard in court is May 15, when
final arguments are made, just prior to the judge’s decision.

The links:
David Simpson’s blog: http://davidsimpson.wordpress.com/2008/05/

May 1 story from the Santa Rosa Press Democrat:

Billionaires fighting for control of timber giant


Call it a clash of the titans, the Wall Street-kind.

Some of the wealthiest names in America emerged as combatants
Thursday in a contentious Texas courtroom battle for control of
bankrupt Pacific Lumber Co., the tattered but still regal monarch
of West Coast timber companies.

The players so far include four billionaires, a super-size Dallas
gambler, and Harvard University’s endowment fund, the richest in
the nation.

Why such keen interest in a bankrupt North Coast timber firm?

Because even with its staggering $714 million debt, Pacific
Lumber’s 210,000 acres, mill complex and the town of Scotia in
southern Humboldt County represent the best there is in big timber

“They are premier assets,” said a Los Angeles investment analyst.

Pacific Lumber’s weeks-long bankruptcy trial in the U.S. District
Court in Corpus Christi was to continue today, but any decision
appears unlikely. Further hearings are scheduled toward the end of
the month.

Going into Thursday’s hearing, San Francisco’s Fisher family,
owner of Ukiah-based Mendocino Redwood Co., and its hedge fund
partner appeared to have an edge.

Overnight Texas financier Charles Hurwitz, the current Pacific
Lumber owner who ran the timber firm into bankruptcy after a
22-reign, and Pacific Lumber executives had signed off on a richer
offer by the Fishers and Marathon Structured Finance Fund. In a
twist, other company executives who represent subsidiary Scotia
Pacific, actual owner of the timberlands, are holding out because
they contend the land value is $900 million, far more than what’s
being offered so far.

Under the new Fisher-Marathon plan, holders of past-due investment
bonds would get $530 million in cash, instead of just $175 million
and another $325 million in new financing notes. Marathon would
take over the town of Scotia as part of its debt settlement with
Pacific Lumber.

Late Wednesday the revised plan was seen as a possible
breakthrough, perhaps signaling an end to an 18-month old
bankruptcy drama.

But in a surprise move Thursday morning, attorneys for holders of
the $714 million bonded indebtedness announced that legendary
California timberman Archie “Red” Emmerson may join with Texas
banker Andrew Beal and Harvard’s endowment fund to make an even
higher offer.

As envisioned under that plan Emmerson’s Sierra Pacific
Industries, California’s single largest landowner, would take over
the Scotia mill complex operation in partnership with Harvard and
Beal. Beal has said he’s willing to put up $603 million cash for
Pacific Lumber’s assets.

Harvard apparently is no newcomer to timber investments.

“It has $5 billion invested in forestry right now,” Harvard lawyer
Steven Hoort told bankruptcy court Judge Richard Schmidt,
according to the Dow Jones Newswires.

But the takeover bid by Mendocino Redwoods, which already owns
more than 200,000 acres of timberlands in Mendocino County, and
Marathon still has support of Gov. Arnold Schwarzenegger, North
Coast timber industry leaders, environmental groups and state and
federal regulators.

Deep pockets, however, has been known to trigger fierce

Brothers William, John, and Robert Fisher are heirs to The Gap
fortune founded by parents Doris and Donald Fisher of San
Francisco. The Fisher brothers are each worth an estimated $1.4
billion, according to Forbes magazine.

Forbes says Red Emmerson, a Humboldt County native who still wears
blue jeans and drives a Chevy pick-up, is worth slightly more:
$1.5 billion. Emmerson’s family owned Sierra Pacific is believed
to be the nation’s third largest private landowner, with 1.8
million acres of timberlands.

Dallas banker Beal’s worth also is an estimated $1.5 billion. And
in Texas, Beal’s passion for poker is widely known. He’s sat down
to some of the highest-stakes private games ever played, according
to the 2005 book “The Professor, the Banker and the Suicide

Other info links:
Alliance for Sustainable Jobs and the Environment

Unsecured Creditors Website


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