The Pacific Lumber Co.'s largest creditor has weighed in on the company's reorganization plan, calling it fatally flawed and infeasible.

The Bank of New York, representing the holders of $714 million in timber-secured notes, on Monday filed its take on the plan with the U.S. Bankruptcy Court in Corpus Christi, Texas. The proposal hinges on the sale of thousands of acres for preserves and another 22,000 acres to be split into 160-acre estates called the Redwood Ranch Development, pursuits the bank called highly speculative and unlikely.

”The Redwood Ranch residential development, proposed to be in the middle of the debtors' timberlands, has no realistic possibility of ever being completed,” the bank writes. “Existing federal, state and local environmental regulations, endangered species protections and land use restrictions, and the debtors' antagonistic history with each of the decision making bodies, prevent any realistic possibility of obtaining the necessary permits and approvals to realize this speculative venture.”

It cites a recent decision by the Humboldt County Board of Supervisors to place a temporary moratorium on building on land zoned for timber production.

A letter sent to Judge Richard Schmidt by the county on Friday draws attention to the ordinance, and says the county does not believe the ranch development would be consistent under the general plan in progress.

The company's reorganization plan, the bank's attorneys write, aims to allow Palco and parent company Maxxam Inc. to retain control of operations even though Palco's debt far outweighs its assets. It also puts the noteholders at risk by putting new debt that could be acquired as part of the proposal in a more senior position than their own, they write.

Palco will come out of the planned restructuring with more debt that it already has, the bank's attorneys write. In order for the plan to work, the noteholders write, Palco must sell 6,600 acres of marbled murrelet reserves for more than $300 million within three years, and sell the Redwood Ranch parcels for more than $700 million within seven years, a prospect they doubt will be realized.

The noteholders' own plan, which they want to submit to the court to gain equal footing, is based on asset values determined by the market, and won't need months of expensive litigation to be confirmed by the court, they write.

Schmidt will hear arguments on Oct. 23 to determine whether to allow Palco's plan to go forward exclusively, or allow creditors to submit their own plans.