Pacific Lumber disputes sent to mediation

By Caroline Salls

Pittsburgh, Nov. 1 - Pacific Lumber Co.'s Chapter 11 case disputes will be settled in mediation, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of Texas.

Judge Barbara Houser of the U.S. Bankruptcy Court for the Northern District of Texas will be the mediator.

According to the filing, Pacific Lumber debtor Scotia Pacific is in negotiations with its timber noteholders and the timber notes indenture trustee to reach a settlement that would allow the individual noteholders to participate in the mediation.

The United States and the State of California will also participate in the mediation proceedings as observers, according to the filing.

As previously reported, the timber notes indenture trustee said it has evidence that Scotia Pacific Co. LLC's assets are worth one-third of what the company's valuation claims and that the Pacific Lumber debtors' reduced cash flow has left them with "perilously low levels of liquidity."

The indenture trustee said in a pre-trial brief that the plan of reorganization Pacific Lumber filed on Sept. 30 is not viable and the company still "has not made good faith progress toward reorganization."

Specifically, the indenture trustee said it has evidence that Scotia Pacific's assets are worth roughly $450 million, less than one-third of the more than $1.4 billion valuation that the debtors claim.

In addition, Bank of New York Trust said the speculative real estate sales for the values proposed in Pacific Lumber's plan of reorganization "are entirely unrealistic."

As a result, the indenture trustee said its secured claim might not be paid, "thus rendering the plan infeasible and non-confirmable."

The indenture trustee has asked the court to terminate Pacific Lumber's exclusive right to file a plan of reorganization and solicit votes on the plan.

Pacific Lumber, a Scotia, Calif.-based producer of redwood lumber and an indirect wholly owned subsidiary of Maxxam Inc., filed for bankruptcy on Jan. 18, 2007. Its Chapter 11 case number is 07-20027.

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