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Humboldt Watershed Council reacts to Palco bankruptcy
The Pacific Lumber Company (Palco) filed for bankruptcy protection today, after years of speculation as to its financial viability. The bankruptcy includes both Palco and its subsidiary Scotia Pacific Corporation (ScoPac), as well as other subsidiaries Britt Lumber, Scotia Inn, Scotia Development, and Salmon Creek LLC.
Palco has long been burdened by tremendous debt, which made the company unprofitable even at massive rates of harvest. This crushing debt forced the company to ignore science, violate regulations, log unsustainably, destroy the watersheds in which it operates, and to deplete the resource upon which it depends.
Palco’s filing should come as no surprise to anyone familiar with the company’s finances. The company’s debt stands at well over $800 million, yet its collective assets are valued at closer to $540 million. There is simply no way the company could ever get back on a stable footing without doing something to reconcile that massive discrepency. That is what this reorganization should seek to accomplish. Underneath that debt are the makings of a profitable timber company, with the potential for annual profits of $30 million to $40 million per year. Once the burden of that debt is relieved, Palco should be a viable, stable company once again.
Palco would like to claim that this bankruptcy is the result of reduced harvests due to over-regulation, but this is simply not the case. The company’s own filings show that they have been within 2% of their planned harvest rate over the last 6 years. What's more, even that 2% dip was almost entirely due to the company's own actions (The company's stay against the Regional Water Board in 2005 prevented the Board from being able to permit any harvest in Freshwater and Elk River watersheds for a full year.)
Palco’s financial crisis has nothing to do with environmental regulations. Rather it is entirely the predictable result of greed and mismanagement. Palco’s own studies from as far back as 1985 predicted that the company could not sustain it’s voracious rate of harvest for more than 20 years, and that to do so would result in “liquidation of the forest.” (their own consultant's words, from the Hammon, Jensen & Wallen report, 1985.)
The company has been over-leveraged for far too long, and it simply could not sustain itself. Quite literally, if the company cut every tree on their land, it would not generate enough cash to pay off the debt. No amount of harvest could save the company.
Palco has long been a lightning rod for the timber industry. The company’s massive, unsustainable logging, its environmental destruction, its hundreds of regulatory violations, and its abusive relationship with the community have created problems for everyone, including other timber companies. The need to reign in Palco has brought down greater regulation upon all timberland owners, large and small. The underlying cause of all of this has been the company’s massive debt, which it has carried since the hostile takeover by Charles Hurwitz and Maxxam in 1985.
The first people to speak up against the takeover were Pacific Lumber Company's employees themselves. In 1985 some 460 employees signed their names to a full page ad in the Times-Standard, saying "We do not believe that this impending takeover is in the best interests of ourselves, the shareholders, or the community in which our company serves."
In all likelihood, the company will continue to operate during reorganization. While sale or conversion of land is a concern, the highest and best use of Palco’s land and its other assets remains timber production. It is in everyone’s interest to see this company finally returned to a position of stability and responsibility, and to make it a company the community can be proud of once again. Who will own the company at that point and under what name is unknown.
Palco’s filing should come as no surprise to anyone familiar with the company’s finances. The company’s debt stands at well over $800 million, yet its collective assets are valued at closer to $540 million. There is simply no way the company could ever get back on a stable footing without doing something to reconcile that massive discrepency. That is what this reorganization should seek to accomplish. Underneath that debt are the makings of a profitable timber company, with the potential for annual profits of $30 million to $40 million per year. Once the burden of that debt is relieved, Palco should be a viable, stable company once again.
Palco would like to claim that this bankruptcy is the result of reduced harvests due to over-regulation, but this is simply not the case. The company’s own filings show that they have been within 2% of their planned harvest rate over the last 6 years. What's more, even that 2% dip was almost entirely due to the company's own actions (The company's stay against the Regional Water Board in 2005 prevented the Board from being able to permit any harvest in Freshwater and Elk River watersheds for a full year.)
Palco’s financial crisis has nothing to do with environmental regulations. Rather it is entirely the predictable result of greed and mismanagement. Palco’s own studies from as far back as 1985 predicted that the company could not sustain it’s voracious rate of harvest for more than 20 years, and that to do so would result in “liquidation of the forest.” (their own consultant's words, from the Hammon, Jensen & Wallen report, 1985.)
The company has been over-leveraged for far too long, and it simply could not sustain itself. Quite literally, if the company cut every tree on their land, it would not generate enough cash to pay off the debt. No amount of harvest could save the company.
Palco has long been a lightning rod for the timber industry. The company’s massive, unsustainable logging, its environmental destruction, its hundreds of regulatory violations, and its abusive relationship with the community have created problems for everyone, including other timber companies. The need to reign in Palco has brought down greater regulation upon all timberland owners, large and small. The underlying cause of all of this has been the company’s massive debt, which it has carried since the hostile takeover by Charles Hurwitz and Maxxam in 1985.
The first people to speak up against the takeover were Pacific Lumber Company's employees themselves. In 1985 some 460 employees signed their names to a full page ad in the Times-Standard, saying "We do not believe that this impending takeover is in the best interests of ourselves, the shareholders, or the community in which our company serves."
In all likelihood, the company will continue to operate during reorganization. While sale or conversion of land is a concern, the highest and best use of Palco’s land and its other assets remains timber production. It is in everyone’s interest to see this company finally returned to a position of stability and responsibility, and to make it a company the community can be proud of once again. Who will own the company at that point and under what name is unknown.
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