Former Governor Wilson selected to manage Scotia Pacific Reorganization

Timber Noteholders Cite Wilson’s Experience, Commitment to Jobs, the Environment, and Sustainable Resource Management

FOR IMMEDIATE RELEASE

March 27, 2008

Contact: Sean Walsh
(415) 203-8991
sean.walsh@bingham.com

SACRAMENTO. Former Governor Pete Wilson, a principal of Bingham Consulting Group, was selected as the Plan Agent for the reorganization of Scotia Pacific Company proposed by the Indenture Trustee for the public noteholders, Bingham Consulting Group announced today.

The reorganization plan submitted by the Indenture Trustee is one of five plans competing for confirmation in the bankruptcy proceedings for the six successor companies to the former Pacific Lumber Company in Humboldt County, California. The Indenture Trustee plan calls for retaining the 210,000 timberland acres of Scotia Pacific in a single company, reorganizing the timber operations under a new buyer, and preserving local jobs while maintaining all existing environmental obligations.

In accepting the position, Wilson has committed to shepherd the bankrupt company through the reorganization process in accordance with five principles presented by Governor Schwarzenegger in a Statement of Position filed earlier this year with the U.S. District Court in Corpus Christi, Texas.

“I have been involved in timber issues in the North Coast for nearly three decades,” said Wilson. “I worked very closely with Senator Diane Feinstein and the federal government to protect and preserve the Headwaters Forest, leading to our agreement in 1998. A key component of that agreement was the habitat conservation plan, the first time we pushed for a regulatory solution on this scale to preserve the conservation value of the timberlands while guaranteeing sustainable timber jobs in this region.”

“Governor Schwarzenegger’s five principles lay out the challenge to fulfill that guarantee, and I am committed—just as I was in 1998—to rebuilding Scotia Pacific on those terms. We will manage the company in accordance with all its existing environmental obligations and economic commitments to the region, and we have built in conditions that enable the company to continue to be operated in this manner in the years to come.”

Toby Gerber, Partner with Fulbright & Jaworski and counsel to the Indenture Trustee for the public noteholders, stated “There is no better qualified individual than Governor Wilson to steward the reorganization of Scotia Pacific and to strike a balance among the competing interests. He knows the history of this company, knows the North Coast, and knows how to manage a company like this to produce sustainable jobs and conservation of these wonderful natural resources.”

Wilson agreed take on the responsibilities of Plan Agent after Scotia Pacific noteholders committed to a series of measures that respond to Governor Schwarzenegger’s Statement of Position. The commitments Wilson will oversee include the following:

The Scotia Pacific timberlands will be managed during the reorganization process in accordance with all local, state, and federal laws, including but not limited to the existing permits and authorizations. These include the Headwaters Forest Agreement, habitat conservation plan and all other state permits, AB 1986, the Agreement relating to Enforcement of AB 1986 and the conditions, covenants and restrictions recorded in accordance with AB 1986. Continuation of this commitment by any purchaser of the timberlands is ensured under the provisions of the Indenture Trustee plan which specifically waives the ability to modify any of these provisions through the bankruptcy court, and makes these provisions a binding and lasting condition on any buyers of the Scotia Pacific timberlands.
The timberlands will be preserved during reorganization by harvesting at a level that provides for sustainable, high-quality timber production over the long term while preserving and enhancing watershed and wildlife protection.
The reorganization plan will preserve as many local jobs as possible. The public noteholder’s plan is the only confirmable reorganization plan that contains provisions to ensure this goal. The plan includes as a condition of sale a binding agreement to provide logs to the Scotia mill, and the reorganization to be overseen by Wilson in fact promotes the continued operation of the mill and its distribution agreements.
The Indenture Trustee plan provides special provisions for small businesses in the North Coast. Unsecured creditors—primarily local service and supply businesses—will receive priority to get full repayment from the public noteholders of what is owed them by Scotia Pacific, unlike the delayed or partial payments proposed in the competing reorganization plans.

As Plan Agent, Governor Wilson will hold powers similar to that of a Debtor-in-Possession or bankruptcy Trustee, in conjunction with a board of directors, including the authority to manage the timberlands and other property of the estate during the reorganization process. Wilson’s new position would be effective following a decision by the bankruptcy court to confirm the reorganization plan filed by the noteholders for Scotia Pacific. That decision is expected to come shortly after a hearing now scheduled to begin April 8.

Wilson served as Governor of California from 1991 to 1998 and was noted for his efforts to improve the management of natural resources in the state. Fulfilling a campaign pledge made almost a decade earlier, Wilson negotiated the Headwaters Forest agreement in 1998. This agreement included the purchase and protection of the 7500-acre old growth redwoods of the Headwaters Forest, subsequent purchase of an additional 2000 acres, a habitat conservation plan specifying sustainable management practices for the remainder of the Scotia Pacific timberlands, and a 50-year protection for 7700 acres of critical habitat for the endangered marbled murrelet. Wilson also signed AB 1986 (Chapter 615, Statutes of 1998) which provided the funds for the state’s portion of the Headwaters purchase agreement and which also contained additional stream protection measures that were later adopted as a separate AB 1986 Agreement and covenants, conditions and restrictions (CC&Rs) on the Scotia Pacific timberlands.

Wilson also served as U.S. Senator from 1983 to 1991, Mayor of San Diego from 1971 to 1982, and California Assemblyman from 1967 to 1971. Wilson currently is a Principal of Bingham Consulting Group LLC.

Scotia Pacific is a successor to Pacific Lumber Company. Following completion of the Headwaters Agreement, Pacific Lumber’s parent company—Maxxam—created Scotia Pacific as a separate company and used its timberlands as collateral for $867.2 million in timber notes. Pacific Lumber was restructured with most of the remaining assets, primarily Scotia Mill and the Town of Scotia. Pacific Lumber is subject to a related but separate bankruptcy proceeding.

Bingham Consulting Group is a subsidiary business of Bingham McCutchen LLP, a national law firm with 13 offices worldwide, seven in California. Bingham Consulting helps national and global companies create and execute effective multistate and state-specific legal and political strategies that are particularly essential in state-regulated industries.