March 19th 2008

By John Driscoll
The Times-Standard
March 19, 2008

EUREKA -- The Mendocino Redwood Co. packed another venue Tuesday during its tour through Humboldt County looking to convince people that its plan to rebuild the Pacific Lumber Co. is the best deal being pitched.

A crowd of Palco employees, creditors and activists filled the Wharfinger Building to get a sense of what might happen if Mendocino Redwood's plan is approved by Judge Richard Schmidt in U.S. Bankruptcy Court in Corpus Christi, Texas in April. Steve Will of Steve Will's Trucking -- a longtime Palco contractor -- told the gathering that the plan promises to pay creditors most of what they're owed up front, and ensures that a reputable company will run the outfit into the future.

Will is a member of the Unsecured Creditors Committee, which has voted to support Mendocino Redwood's plan and against the one pitched by Palco and the timber noteholders, who are owed the most. He said the noteholders' plan only addresses the timber holding subsidiary Scotia Pacific, and that the Palco plans aren't economically feasible.

"They're still going to be under a huge debt load with the other plans," Will said.

Huge debt is what drove Palco into bankruptcy 14 months ago, when it failed to make a semi-annual payment to its creditors. Now its parent company Maxxam Inc., run by businessman Charles Hurwitz could lose control of the company.

Frank Weber, who said he worked for Palco subsidiary Britt Lumber Co. -- which has closed its Arcata plant -- and now works in production for Palco, told Mendocino Redwood representatives that Palco has a dedicated workforce that is versatile after downsizing efforts, and asked what would happen to it.
Mendocino Redwood Chairman Sandy Dean said the intent is to run the Scotia mill, after putting $7.5 million into improving it, as well as its own Ukiah sawmill.

Earlier in the day at a meeting with the Times-Standard's editorial board, Dean said that it's possible that a second shift may be added at the Ukiah sawmill while the Palco mill is improved to give workers an opportunity to work through downtime. He also blamed Palco's financial troubles in part on a mill that tries to produce as much lumber as it can cheaply, instead of producing lumber the market demands.

Dean said the company estimates 250 employees will be needed to run the new company, whose timber and lumber operations will be merged for greater efficiency. Palco has about 350 employees now.

Several activists at the Wharfinger Building questioned Mendocino Redwood's assurances about logging light and not cutting old-growth trees. Activist Kim Starr claimed that the company ramped up clear-cut logging significantly when it bought its Mendocino lands from Louisiana-Pacific Corp. about 10 years ago.

"I don't think we need another corporate invader," Starr said.

The claims don't gibe with Mendocino Redwood's account, and Dean invited anyone who wanted clarity on a tour of their property to the south. Mendocino Redwood has said it plans to log about 55 million board feet of lumber a year for the first 10 years if it takes over Palco. Last year Palco cut about 76 mmbf, the year before about 100 mmbf, and an average of 126,000 mmbf on average between 2003 and 2007.

Scott Greacen with the Environmental Protection Information Center, one of Palco's biggest critics, is in support of Mendocino Redwood's plan, and is part of the Unsecured Creditors Committee. He said that Mendocino Redwood isn't the perfect company and doesn't necessarily have the perfect plan, but is vital to the company going forward.

"The most important thing at this point in the Pacific Lumber Co.'s history is that we have the chance to take Charles Hurwitz and Maxxam out of the driver's seat," Greacen said.

On the Web: A summation of the various plans can be found at Joint Disclosure Statement for All Plans.

John Driscoll can be reached at 441-0504 or jdriscoll@times-standard.com.