June 20th 2008

Santa Rosa Press Democrat
June 20, 2008

A decade ago, a 23-year-old woman named Julia "Butterfly" Hill climbed atop a Humboldt County redwood tree owned by Pacific Lumber Co. and began a two-year protest perch.

Now a group of Pacific Lumber creditors are planning to do the same thing.

They intend to sit on a promising bankruptcy deal that would herald the end of two decades of controversy surrounding Pacific Lumber and allow the company to be transferred to new owners -- the family of GAP founders Don and Doris Fisher -- with a better reputation for logging practices.

The creditors' primary goal appears to be to see Pacific Lumber liquidated. But just by appealing the bankruptcy plan, this bloc of major lenders, led by the Bank of New York Trust Co., could tie up the deal in court for years, leaving the future of this 125-year-old company, its 210,000 acres of timberland and the mill town of Scotia in limbo.

These creditors, whose distorted view of the company's worth is in danger of giving them vertigo, need to brought down to earth.

Under the plan recently approved by a federal bankruptcy court judge in Texas, Pacific Lumber would be taken over by Mendocino Redwood Co., a company owned by the Fisher family, and an East Coast hedge fund.

The $530 million deal is being hailed by environmentalists, North Coast residents and businesses -- as well as California's governor -- as the best hope for the company and the region. The ruling by Judge Richard Schmidt noted that Mendocino Redwood Co. is "an experienced, environmentally responsible operator with a proven track record" and a reputation for being cooperative with regulators.

This is in contrast to the company's volatile history under Houston-based Maxxam Inc., led by financier Charles Hurwitz who acquired Pacific Lumber in a junk-bond deal of his own making in 1986. Critics contend that the company accelerated logging to unsustainable levels, often at the expense of the environment, while the company was driven into the ground by fiscal mismanagement.

The company claims it was driven into bankruptcy court in January by heavy-handed government regulation that prevented it from making a profit, a profit it had been promised as part of the $500 million deal to acquire the Headwaters Forest in 1998.

It's time to move past these disputes.

By all accounts, the deal on the table allows creditors to be fairly compensated. The judge stated as much. "After carefully reviewing all the expert testimony, the court finds that the value of the timberlands is not more than $510 million," Schmidt said in his ruling.

More importantly, the deal gives Pacific Lumber a future and its relations with environmental groups and government regulators a fresh start, which at one time was little more than a lofty hope.