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On the Job

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A lot went down at the crucial Pacific Lumber bankruptcy hearing we previewed last week. Most importantly, each of the four plans on the table were sent forward, and now all the various interests in the case — the owners of the company and all the people the company owes money to — will be putting the issue to a vote, according to the complex rules of Chapter 13 bankruptcy law. The votes are due around the end of the month.

Around mid-March, then, we should have a solid idea of what the next Pacific Lumber will look like. Will Mendocino Redwood Co., the eco-friendlier timber company to our south, step in and take over? Or will Palco's approximately 200,000 acres of Humboldt County timberland be put up for auction? Or will the company be carved up between its current owner, Charles Hurwitz's Maxxam Corp., and the company's two principal creditors (the "cram-down" plan)? Or will Maxxam stay in control, seeking to pay off its debt by developing a big swath of its holdings and selling others to the government at ridiculously inflated prices?

The latter two options are the ones put forward by Maxxam itself, and one came close to being taken off the table at Thursday's hearing at the request of several groups of the company's creditors. They made the case that the coming vote would be a little bit less confusing if there were one fewer intricately detailed plan on the table. They argued that the Maxxam "consensual plan" — the last one detailed above, which in an earlier version so pissed off county government that the Board of Supervisors took emergency action to try and torpedo it — stood no chance whatsoever of coming to fruition.

Creditor Marathon Capital Group, which is behind the Mendocino Redwood Co. plan, said that there was no way that it would ever vote for the Maxxam consensual plan, and due to the nature of the plan and the rules of bankruptcy Marathon held an effective veto over it. Also, a lawyer representing the holders of the company's "timber bonds" — around $730 million dollars worth, secured against the company's Humboldt County acreage — said that he believed his clients would never consent to the plan. And a lawyer representing unsecured creditors said that he would recommend that they vote for the Mendocino Redwood Co. option.

"If it's a done deal that this plan will never be confirmed, I have a hard time sending it out," said Judge Richard S. Schmidt, acceding to these arguments. But an attorney for the company later argued that it would do little harm to send it out, and the plan could provide the basis for some negotiation — that no matter how many key parties denied they would ever vote for the plan, perhaps they could be brought around. So Schmidt left it in, and the various plans go out for vote.

Perhaps the most interesting part of the hearing was what came next, after it seemed that all the principal business was done. A bit of a fight broke out between lawyers representing Scotia Pacific Co., the Pacific Lumber subsidiary that manages the timberland, and Pacific Lumber proper. It turned out that Pacific Lumber had cut off payments to its sister company, and as a result Scopac had to seek additional loans to tide it over.

A Pacific Lumber attorney outlined the situation facing the company. At the time of the hearing, the company had about 25 million board feet of lumber ready for sale, but few people were buying. It had only $1.5 million in the bank, it said. And it was in a bit of a pickle, because parent Maxxam Corp. had abruptly stopped buying logs and lumber to tide the company over.

Where had Maxxam gone? Is Hurwitz cutting his losses, and cutting Pacific Lumber loose? That would seem to be the implication, but you can forget ever getting anyone on the record to say as much.

But what does this cash crisis mean for Pacific Lumber and Scotia Pacific over the next couple of weeks? In an e-mail, company spokesperson Heather Mullersaid that they will soldier on.

"Negotiations between the debtors are continuing literally as we speak, but we are hopeful that an agreement will be reached in time for the hearing Thursday," she wrote. "It is the companies' position that this is largely an internal matter between Palco and Scopac. Both entities have sufficient liquidity to meet their payroll and other obligations on time and are not anticipating an impact on operations."

Meanwhile, we pause to note two other developments. One, most of the commercial buildings in Scotia were suddenly listed for sale on the Humboldt County Multiple Listing Service. The Scotia Inn was also listed with an out-of-town hotel broker. And two, District AttorneyPaul Gallegos asked the Supreme Court to review the recent appellate court ruling in his career-defining lawsuit against Pacific Lumber. The appellate court ruling, which came down in January, marked Gallegos' third loss in the case without it ever having gone to trial. And so now it goes to the Supreme Court, even as the defendant in the case is on the verge of dissolution.

Everyone knows about the cutbacks over at the Eureka Reporter that came into effect around the turn of the year. The upstart free daily newspaper, run by local kazillionaire Rob Arkley's Security National family of corporations, was once printed on the finest newsprint the industry has to offer. Now it's down to the same dingy gray crap we all use. Also, the Reporter cut down to a five-day-per-week schedule. Also, it filled its newsroom with rookies.

This belt-tightening naturally was the cause for some celebration over at the Times-Standard, the 150-year-old Humboldt County institution that the Reporter had set out to displace. Some left-leaning local commentators went so far as to call it the beginning of the end of the newspaper war, and polished their tap shoes in preparation for the day the Reporter would be lowered into the grave.

But since the Times-Standard belongs to skinflint mogul Dean Singleton's MediaNews Group, it was probably only a matter of time before the glee at the paper's Sixth Street headquarters was squelched. And while last week's morale-dampening announcements at the T-S weren't quite as devastating as the ones at the Reporter a few months ago, they're still sorry compensation for effectively bringing the enemy juggernaut to a halt.

Times-Standard staffers were given two pieces of news last week. One, there would be a hiring freeze at the paper, so that money could be saved by leaving some positions unfilled. Second, the staff's customary annual "merit pay" raises would be suspended indefinitely.

We left a message seeking comment with T-SPublisher Greg Stevens, who dispatched Editor Rich Somerville to speak with us. We asked if these cutbacks had to do with problems at the MediaNews level or matters internal to the Times-Standard. Basically, neither, Somerville said. He spoke instead to macroeconomic factors that have been affecting the entire newspaper industry, and said — accurately — that the cuts at big-city papers have been much worse than anything the Times-Standard has yet experienced.

Somerville did allow, though, that Humboldt County's media-rich market has its own challenges. "You know as well as I do that there's only so much advertising revenue to go around in a rural market like this," he said. "So every additional company or news outlet that tries to survive on advertising is going to get a smaller piece of the pie."

Meanwhile, there's at least one open position in Somerville's newsroom: Photo Editor Mark McKenna was abruptly fired on Friday. Somerville said that he couldn't speak to the specifics of the case, it being a personnel matter.

Reached Tuesday morning, McKenna didn't seem to be sweating his change of circumstances. He'd already lined up a one-off gig to shoot a five-day beer festival in Hawaii, and had a long list of leads for the future. He was just about to drive down to the City to catch his friends' band's show. He said they'd just signed with legendary producer Rick Rubin.

"I'm saying, 'Listen, dude, let me take some photos and you show them to the Rickster,'" McKenna told us. "Because I wanna photograph rock stars and get paid fat bank for it."

Which would certainly be a change of pace from the T-S in more ways than one.

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