Maxxam/Pacific Lumber Agrees to Go Along With Mendocino Redwood Co. Bid for Company; Debt-Owners Have Only Other Plan Before the Bankruptcy Court;
All-cash $530 million bid for Pacific Lumber likely to get OK
By MIKE GENIELLA/THE SANTA ROSA PRESS DEMOCRAT
May 03, 2008
Mendocino Redwood Co. and a $9 billion New York hedge fund are still seen as the likely new owners of bankrupt Pacific Lumber Co., the North Coast's biggest producer of premium redwood lumber products.
Despite a flurry of new outside interest, a revised all-cash $530 million takeover proposal by Mendocino Redwood and partner Marathon Structured Finance Fund remains the only binding proposal before a federal bankruptcy court in Texas.
Federal Judge Richard Schmidt on Friday set a final Pacific Lumber hearing for May 16, indicating he might decide soon after."We're confident of a positive outcome," said Sandy Dean, chairman of Mendocino Redwood.The Ukiah-based company, which already owns 200,000 acres of Mendocino County timberlands, was formed 10 years ago by members of San Francisco's Fisher family. Its timberland management practices have drawn praise from within the timber industry, among state and federal regulators, and the North Coast environmental community.
A revised Mendocino-Marathon proposal that is all cash is being scrutinized by a consortium of investment banks, which until now have resisted the takeover. They've wanted more for the $714 million they hold in Pacific Lumber's bonded indebtedness.
Analysts said Friday they believe lenders might now accept the Mendocino-Marathon deal to resolve a bankruptcy case that's dragged on for 15 months. Pacific Lumber executives have warned the company could run out of money by May 20 and be forced to close the Scotia sawmill complex and lay off up to 350 workers.
Texas financier Charles Hurwitz, Pacific Lumber's current owner, and company executives on Thursday reached an agreement with Mendocino-Marathon for an eventual takeover. In addition, the deal is favored by state and federal regulators, leading political figures -- including Gov. Arnold Schwarzenegger and U.S. Sen. Dianne Feinstein, D-Calif. -- and key North Coast environmental groups.A flurry of speculation about a potential bidding war was sparked Thursday by expressions of interest in Pacific Lumber assets from Harvard University's $40 billion endowment fund, and a proposed partnership involving a Dallas banker and lumberman Red Emmerson, California's biggest timberland owner.
But analysts said Friday an auction could raise a host of new concerns for lenders, who are eager to get paid."It appears lenders are giving the new Mendocino-Marathon proposal a hard look," said a West Coast analyst, who asked not to be named.