Pacific Lumber Company Files For Bankruptcy Protection
Pacific Lumber Co. announced last week that it had filed for Chapter 11 bankruptcy protection. The lumber company said a major reason that it needed to file for bankruptcy was because it had entered into the “Headwaters agreement,” which protected some of the world’s largest and oldest redwood trees from being chopped up at lumber mills.
Pacific Lumber is one of the largest timber companies in California. It filed for bankruptcy protection at a Texas federal court in Corpus Christi, Texas. Based in Scotia, California, the lumber company said it would not be able to make its $27 million interest payment that was due to bond holders last Saturday. This missed payment, according to Pacific Lumber, would cause the company to default on $714 worth of loans and lose the 200,000 acres of timberlands in Humboldt County that it had used for collateral.
Pacific Lumber, the State of California, and the U.S. government had signed an agreement giving the timber company 7700 acres of public timberland and $300 million in exchange for 5,600 acres of company land, where some of the tallest and oldest redwood trees in the world continue to grow. The deal also included a “habitat conservation plan” which regulated how many trees the company cut down.
In December 2006, Pacific Lumber filed a lawsuit against California claiming that certain government regulations ran afoul of the agreement. The timber company said the agreement had increased its logging expenses and the conservation plan made it so hard to cut down trees that the company’s future had been put at risk.
Pacific Lumber Company, which began logging in 1882, is a subsidiary of Maxxam Inc. Since the 1980’s, dozens of mills have shut down and eliminated thousands of jobs. While major timber companies had been forced to sell off hundreds of thousands of acres of land, Pacific Lumber Co. is the first one to file for bankruptcy protection.
Filing for Chapter 11 bankruptcy lets a company debtor have some reprieve from having to pay their debts, while they restructure their business and come up with a reorganization plan. The plan is usually agreed upon by the debtor, creditors, and the court. Chapter 11 bankruptcy allows a business to stay in operation, and under this protection, certain kinds of debts can be lowered or cancelled. Examples of debts that can be canceled include operating contracts, supply contracts, unsecured loans, and union contracts.
Scott Sagaria and his team of attorneys at Sagaria Law, P.C. works with companies and individuals in need of bankruptcy protection in Santa Clara County, Alameda County, and Monterey County. We represent clients in Chapter 11, Chapter 7, and Chapter 13 bankruptcy cases. Contact Sagaria Law, P.C. today to schedule a free consultation.
Pacific Lumber files for bankruptcy, blames 'Headwaters' deal, SFgate.com, January 19, 2007
Pacific Lumber Files For Bankruptcy, MSNBC.com, January 19, 2007
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