August 8th 2008

By Mike Geniella

Santa Rosa Press Democrat

August 8, 2008

Log deliveries resumed Thursday at Scotia's sawmill complex, marking the return to near normal operations for a reorganized Pacific Lumber Co.

The company is now known as Humboldt Redwood Co., reflecting a change in ownership as part of a $550 million deal approved last month by a federal bankruptcy court in Texas.

Members of San Francisco's Fisher family, heirs to the Gap clothing fortune, and an East Coast hedge fund are partners in the venture that rescued the North Coast's oldest timber company from bankruptcy.

Scotia's beloved town whistle is blowing again at 6:30 a.m. every day to summon mill hands to work, a comforting tradition as changes unfold around them.

About 250 of the old Pacific Lumber's remaining 300 employees are back on the job following a rehiring process. The work-force reduction was part of the takeover plan approved by the federal court.

"On the surface it looks like business as usual," said Richard Higgenbottom, Humboldt Redwood's chief executive officer.

But major management changes have been put in place, he said, including implementing new protections for the remaining old-growth redwood trees dotting the company's 210,000 acres of southern Humboldt County timberlands.

In addition, Higgenbottom said new owners have put an end to controversial practices of clear-cutting stands of timber no matter the age of the trees.

The policies were implemented in Mendocino County 10 years ago when the Fisher family acquired 225,000 acres of former Louisiana-Pacific Co. timberlands as a long-term investment. With the former Pacific Lumber lands, the Fishers now control about 525,000 acres of some of the North Coast's best timber-growing acreage.

The Fishers' Humboldt Redwood Co. two weeks ago wrested bankrupt Pacific Lumber from a Texas firm's ownership. Partner Marathon Structure Finance, an East Coast hedge fund, now owns the historic town of Scotia, its houses and business district, and industrial parcels in nearby Fortuna and Carlotta.

The new owners replace Maxxam Inc., a Houston-based conglomerate owned by financier Charles Hurwitz.

Maxxam in 1986 seized Pacific Lumber in an $850 million surprise takeover that shocked the West Coast timber industry and environmental communities. Under its ownership, Maxxam sharply accelerated logging to make interest payments on a staggering junk-bond debt that remained unpaid 20 years later.

The Fisher-Marathon takeover was bitterly opposed in bankruptcy by a group of Maxxam lenders led by the Bank of New York Mellon Trust. Together the banks were owed in excess of $705 million. Marathon, the hedge fund partner of the Fishers, was owed $175 million, secured by a note on the town of Scotia.

The lenders are appealing the bankruptcy court's approval to a U.S. district court in Louisiana, but the legal wrangling could take two years or more to resolve.