Maxxam/PL (Scotia Pacific) barely avoids bankruptcy

As you read in our previous alerts, the Maxxam-owned subsidiaries ravaging the redwoods in northern California had been loudly forcasting chaos and ruin because of impending bankruptcy. The day of reckoning was tomorrow, July 20, because of an interest payment due from Scotia Pacific (now a subsidiary of Pacific Lumber, via Maxxam's 1998 refinancing). The bankruptcy has been averted, at least for the moment, due to an "early payment" from Pacific Lumber's mills that handles the logs from the logging operations.


It was only by the skin of their teeth (fangs?) that the company avoided default, however, and they continue to pressure agencies to release more logging plans. On July 16, PL sued the State Water Board over their stay on logging plans in impaired watersheds in June.


Their financial condition remains highly leveraged and tenuous, due to barely legal manipulations by Charles Hurwitz in Houston. The company is so heavily burdened with debt remaining from the purchase 19 years ago that a Water Board economist stated that even if they cut every remaining tree, they probably still would not have the funds to pay down the debt.


The company now intends to pursue negotiations around another restructure with its bondholders.


Stay tuned.




Scotia able to cover July bond payment

Scotia Pacific Lumber, the timber-owning subsidiary of Pacific Lumber Co., says it will avoid default on a bond payment due Wednesday. That avoids the immediate possibility of layoffs, plant closures or a bankruptcy filing.

Scotia Pacific and Pacific Lumber are owned by Maxxam Corp., based in Humboldt County. Scotia Pacific, which owns Maxxam's forest land and sells redwood logs to Pacific Lumber, had warned earlier this year that it might not be able to cover the bond payment. The company said a bond default might affect Pacific Lumber's operations.

In a financial statement filed Friday, Scotia Pacific said Pacific Lumber had made an earlier-than-required payment of $2.2 million. That allowed Scotia Pacific to pay the full $27.9 million interest due Wednesday.

Friday's filing said Scotia Pacific will continue trying to restructure its bond obligations, which stood at $692 million as of May, and reiterated that "in the absence of significant regulatory relief" from agencies that have reduced its log harvests, it may have to lay off employees, shut down operations or file bankruptcy. -- Tom Abate
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