May 29th 2008

The Eureka Reporter
May 29, 2008

The federal judge overseeing the Pacific Lumber Co.'s bankruptcy case told attorneys during a hearing in Texas on Thursday that he would likely make a ruling in the case by the end of next week.

Judge Richard Schmidt heard final arguments in the case on May 15, but provided little few clues as to which of the two viable reorganization plans submitted to the court he would likely choose.

The reorganization plan from the group of creditors -- the Timber Noteholders -- which are owed nearly $760 million from Scotia Pacific Co. and hold the timber company's 210,000 acres of land as collateral, is seeking to sell the lands in a bidding process.

The other plan, submitted by PALCO creditor Marathon Structured Finance Fund and Mendocino Redwood Co., which received last-minute support from PALCO and its parent-company MAXXAM Inc., aims to take over the lands and the mill to keep the timber operation in production.

PALCO officials confirmed the judge's comments Thursday that came during a hearing to resolve two minor issues, including a long-standing log purchase agreement between SCOPAC and PALCO.

Frank Bacik, vice president and general counsel for PALCO who listened to the Thursday's proceedings by telephone, said Schmidt told the attorneys that he probably shouldn't tell them when he was likely to rule, but did anyway.

Bacik told The Eureka Reporter that Schmidt said he was busy working on the conclusions of law and the findings of facts, opinions and a ruling that will accompany his ultimate decision, but had asked for supplemental briefs from the parties on an issue that wasn't addressed during the nearly two-week confirmation hearings that stretched throughout May.

Schmidt apparently raised concerns that the MRC plan may not be confirmed under bankruptcy laws, Bacik said.