Update on Maxxam manipulations

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Will there soon be a NEW owner of redwood forest in Humboldt county?
You may have read news reports today-here is a breakdown of information in a hasty synopsis.

With the announcement that Maxxam Corp. has offered terms to the bondholders of its financially troubled timber company, Pacific Lumber subsidiary Scotia Pacific, various stakeholders have focused their attention on discussions that are, for the most part, taking place behind closed doors. Scotia Pacific (ScoPac) released a report on Monday Aug. 1 to the Securities and Exchange Commission outlining an offer to the company's bondholders of 90% of the equity in the company (with Maxxam holding on to the other 10%) plus $300 million in new bonds. With $700 million in debt still left from the junk bond-financed1985 purchase by Maxxam of Pacific Lumber, the offer translates to put ScoPac's total worth at something in the neighborhood of $450 million, 90% of which is far less than the investment held by the bondholders.

The forest acreage was mortgaged in 1998 to sell $867 million in bonds, keeping the debt level nearly on par with the debt incurred in the takeover of the company. That refinancing in 1998 also restructured the company so that ScoPac holds the entire debt burden and the 205,000 acres of timberland while Pacific Lumber owns the mills. That linking of the mammoth debt and the forestland has meant that the harvest rate is directly driven by the payments required on the debt, kept at the same high level for 19 years while the resource base has been being depleted.

So we have gotten to where we have been headed.
But also on the horizon is the prospect of a post-Maxxam era in redwood country.

Presumably, the bondholders also see the benefit of Maxxam and Hurwitz stepping out of the picture, since it is Hurwitz's management decisions, having little to do with the timber market but everything to do with liquidation logging, that have brought the company, the community and the forest to the present situation. In short, the bulldozer named Maxxam, driven by a corporate raider drunk with his own power to manipulate has cut an ugly and long-lasting swath through the redwood forest in California and is now panhandling for gas money when its tank ran dry.

Let's be real. In the 19 years since the takeover of PL by Maxxam, the parent company has reaped huge benefits by logging valuable old growth redwoods, by selling off PL assets, by unburdening the company of pensions and benefits by shifting so many positions to contract workers, and of course by reaping the benefits of the Headwaters Deal. Specifically, liquidated and sent to Houston were assets including $55 million from a pension fund, a $325 million welding works operation, and a $31 million downtown office building in San Francisco. Then there was the $480 million from the Headwaters Deal (Hurwitz himself got an $11 million bonus for negotiating that), dividends from refinancing ($250 million in the 1998 refinancing) and $2.5 billion in logging profits since 1986.

They could have paid off their junk bond debt. They could have re-instituted sustainable logging (as their predecessor did) and ensured saw timber and jobs in perpetuity. But it would have meant small reductions in large salaries of their top execs. Who should pay the price for their cut-and-run management style?

The communities on the north coast have already paid a huge price-in loss of jobs, silt-clogged streams where once there were fish, landslides and floods caused by logging, and a divided populace, a wedge named Maxxam driven deep between them. The natural community has suffered tremendously, with clearcuts and barren landscape where pre-Maxxam PL carried out select cuts that theoretically could have continued in perpetuity. Can we get back to sustainability?

An interesting parallel exists in another Maxxam subsidiary-Kaiser Aluminum. After purchasing the pioneering aluminum company once run by "benevolent industrialist"
Henry J. Kaiser, Hurwitz immediately began squeezing the workers for wage and
benefit concessions. Now, fifteen years after the takeover, Kaiser is
emerging from a three and a half year-long bankruptcy reorganization as a
Hurwitz-free company. PL can too.

It will take very creative thinking, creative financing and commitment to a sustainable future. We urge you to stay tuned and support emerging initiatives.
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