Beginning of the End-Game for Maxxam in Humboldt County

Beginning of the End-Game for Maxxam in Humboldt County

August 4, 2005

For more information, please contact: Sam Johnston, EPIC, 415-752-7166

Humboldt County, CA — On Monday, August 1, Maxxam, Inc.’s subsidiary Scotia Pacific LLC (ScoPac) released a report to the Securities and Exchange Commission outlining the terms of an offer by Maxxam to ScoPac’s bondholders.

Maxxam CEO and majority shareholder Charles Hurwitz is now showing his hand by offering up his timber-holding subsidiary to his creditors. After nearly two decades of liquidating the ancient redwood ecosystem of northern California, liquidating jobs, and bullying agencies and politicians into giveaway deals, Hurwitz has now made clear that he intends to let go of the debt-saddled ScoPac, which owns the remaining timber on the 220,000-acre Pacific Lumber (PL) property in Humboldt County. ScoPac is a subsidiary of PL, which is owned by Maxxam.

Since Maxxam took over PL in 1985 in a leveraged buyout, PL’s long-term debt has averaged over $800 million. Payments on the bonds have driven the company’s rate of timber harvest with devastating results for the endangered species and rural communities that depend on the forest and healthy watersheds for survival. Currently about $700 million in debt remains outstanding. On July 20, ScoPac narrowly averted defaulting on a $27.9 million interest payment, scrambling to make the payment by obtaining money from PL.

ScoPac’s proposal, made public in the 8K report filed August 1, offers the bondholders 90 percent of the equity in ScoPac, plus $300,000,000 in new bonds. Subtracting the $300 million from the $700 million in current debt shows that 90 percent equity cannot be valued under this offer at anything more than $400 million, and could well be less. The value of 100 percent of ScoPac’s assets could thus not be worth more than about $450 million, far below the $700 million the bondholders are owed. Moreover, the value of ScoPac’s over 200,000 acres of timberlands is less than the $480 million that the government paid Maxxam/PL for less than 7,500 acres in the 1999 “Headwaters Deal.”

Hurwitz’s liquidation logging has caused such extreme damage to the sensitive ecosystems of northern California’s coastal forests that regulatory agencies must step in to protect human health and safety, on top of all the irreversible losses to endangered habitat that have already occurred in what remains of this once magnificent forest ecosystem.

“It is high time that the needs of the community, and the condition of the ecosystem that supports community and wildlife, drive the financial management of timber companies, and not the other way around,” said EPIC spokesperson Sam Johnston. “We are now at a crossroads,” Johnston added.

EPIC continues to look to the future and to envision the responsible, sustainable forestry practices that a Maxxam-free Pacific Lumber can achieve, believing that sustainable forestry can exist beside a sustainable business model. For now, the recent offer by Hurwitz to the bondholders appears to mark the beginning of the end of Maxxam’s devastating operations in Humboldt County’s forests.