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Pacific Lumber Creditors Put Lower Value on Assets than Company Claims

John Driscoll The Eureka Times-Standard
10/11/2007

http://www.times-standard.com//ci_7146687

A document that had been under seal in the U.S. Bankruptcy Court case of the Pacific Lumber Co. holds that its timberlands are worth only a fraction of what the company has estimated.

The declaration of Christopher Di Mauro of Houlihan Lokey, Howard and Zukin Capital -- consultants for the group that holds $714 million in notes secured by 210,000 acres of timber -- estimates the land is worth between $290 and $500 million. Some 6,660 acres of land off limits to protect the threatened marbled murrelet are worth between $10 and $20 million.
The estimate shows just how far apart Palco and its main creditors are. In a reorganization plan filed at the end of September, Palco claims its properties -- split into 181,000 acres for working timberland and 29,000 acres for a high-end rural development and reserve lands -- are worth $1.4 billion.

That exceeds any reasonable estimates of value, Di Mauro wrote in the declaration that were among those Palco subsidiary Scotia Pacific had asked to be kept sealed. Judge Richard Schmidt approved an agreement between the parties to release much of the information this week.
Di Mauro said that Houlihan Lokey has yet to have productive talks about the restructuring plan with Scotia Pacific, and remain far apart on the value of the assets.
”Scotia Pacific and its advisors have not provided a single document or analysis to support the unreasonable valuations to which they continue to cite in their restructuring proposal,” Di Mauro said.

The value of Palco's assets will be at the center of the bankruptcy court's consideration. If its debts are worth more than its assets, in rough terms, Palco parent company Maxxam Inc. could lose control of the company to the noteholders.

The court on Oct. 23 will consider whether to allow Palco's restructuring plan to continue as the only plan, or to allow creditors to submit another reorganization plan.