March 31st 2008

By David Mclaughlin
The Wall Street Journal
March 31, 2008

Harvard University's $35 billion endowment is thinking about buying a large swath of Northern California forest if a court approves an auction of the land as part of Pacific Lumber Co.'s bankruptcy case.

A Pacific Lumber subsidiary that owns more than 200,000 acres of timberlands said in court papers filed Friday that Harvard Management Co., which manages the endowment, is a potential bidder.

Joe Wrinn, a spokesman for Harvard Management, declined to comment Friday or to say why the endowment might be interested in forest property. Harvard has the largest college endowment in the country. For the fiscal year ending in June 2007, it reported a 23% investment return. The endowment owned $2.7 billion worth of real estate at the end of that period, according to its annual report.

Pacific Lumber, based in Humboldt County, Calif., filed for bankruptcy last year. Its fate is riding on competing plans to pay back creditors and take the company out of bankruptcy proceedings. Pacific Lumber is pushing its own proposal to reorganize but so are two of its main creditors.

One of those plans is backed by bondholders of Pacific Lumber subsidiary Scotia Pacific, which owns the timberlands. Those bondholders, represented by Bank of New York Mellon Corp., have called for selling the land at an auction.

The U.S. Bankruptcy Court in Corpus Christi, Texas, which is overseeing the company's Chapter 11 case, will begin hearings next month to approve one of the plans. In addition to the bondholders, hedge fund Marathon Asset Management has teamed up with logging company Mendocino Redwood Co. to offer a plan.

In preparation for the confirmation hearings, Scotia Pacific has subpoenaed 12 bidders that are interested in bidding for the land, according to court documents.

Another bidder is a consortium that includes The Nature Conservancy, Bank of America Corp. and Save the Redwoods League. That group was fighting subpoenas issued by Mendocino, arguing the logging company was trying to obtain information about its potential bid.

Lawyers for Mendocino and the Nature Conservancy Group could not be reached for comment Friday.