Pacific Lumber parent supports lender reorganization plan

By Caroline Salls

Pittsburgh, May 1 - Pacific Lumber Co. parent Maxxam Inc.'s board of directors has agreed to support the reorganization plan proposed by Mendocino Redwood Co., LLC and Marathon Structured Finance Fund LP for Pacific Lumber's Chapter 11 case, according to a Maxxam news release.

Maxxam said it believes that this plan represents the best outcome for the company and its workers.

As previously reported, five different reorganization plans were filed for Pacific Lumber's bankruptcy case.

Marathon and Mendocino's plan calls for the integration and management of the debtors' commercial timberland and sawmill operations under a business plan developed by Mendocino.

This plan also proposes a restructuring of the Pacific Lumber-owned town of Scotia, Calif.

Under the plan, Mendocino and Marathon will receive 100% of the new common stock of the reorganized company, with 85% to be distributed to Mendocino and 15% to Marathon.

Timber noteholders will receive $790 million in new 25-year series A timber notes, which will bear interest at 2.75%.

In addition, the plan proponents will contribute either $225 million or $75 million in cash to the reorganized company to fund various claims associated with the reorganization cases, ordinary working capital, capital investment in Mill and an interest reserve, depending on an election to be offered to timber noteholders.

Holders of trade claims and general unsecured claims will receive their share of $10.1 million, plus their share of litigation trust participation for any remaining amount until the claims are paid in full.

Meanwhile, holders of secured trade claims will receive their share of $500,000, plus their share of litigation trust participation until the claims are paid in full.

Interest holders would not receive a distribution under this plan.

Pacific Lumber is a Scotia, Calif.-based producer of redwood lumber and an indirect wholly owned subsidiary of Maxxam. It filed for bankruptcy on Jan. 18, 2007 in the U.S. Bankruptcy Court for the Southern District of Texas, and its Chapter 11 case number is 07-20027.

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