Kaiser Aluminum files for Bankruptcy

Kaiser bankruptcy unlikely to hit PL
By John Driscoll
The Times-Standard


Kaiser Aluminum Corp.'s decision to file for bankruptcy should have no effect on the Pacific Lumber Co., according to Maxxam Inc., the Houston-based holding company that owns the two businesses.

Kaiser is the third largest producer of aluminum in the United States, but it has collapsed under a huge debt and in a market offering low prices for aluminum. Maxxam owns 62 percent of Kaiser, and investors seem to have hitched its stock price to Kaiser's performance.

The aluminum company needs to come up with $174 million in principal to its bond holders when it comes due on Friday, reported Reuters, or file for Chapter 11 bankruptcy protection.

Maxxam spokesman Josh Reiss said the financial problems of Kaiser shouldn't effect PL. Reiss also said PL's recent moves to trim the company workforce and sell assets has nothing to do with Kaiser's problems.

"Robert Manne (PL's president and CEO) is doing what PL needs to do to right the ship," Reiss said. "It is completely unrelated."

Pacific Lumber has had a negative cash flow of about $80 million over the past two years. That spawned a review of the Scotia-based company's operations that eventually led to the termination of several hundred employees, the closure of two mills in Scotia and the sale of logging and trucking equipment.

Maxxam bought the company in an unfriendly takeover in 1985, financing the purchase with about $750 million in bonds. Those bonds do not mature for 26 years, however.

A nearly $60 million line of credit exists to pay the interest on that debt, Reiss said. And $150 million from PL's sale to the state and federal government of several thousand acres in the Headwaters Forest is in a restricted account for principal payments. Interest and principal payments have been made to date, Reiss said.