Timber firm files for Chapter 11
Crown Pacific Partners, the Portland-based timber firm whose financial troubles have been escalating for more than two years, has lined up $40 million in emergency financing after filing for Chapter 11 bankruptcy protection.
The company, which had aggressively expanded its timberlands and other assets in 2000, was not able to recover when the forest products market faltered in 2001 despite selling or closing three sawmills.
The company's only option is to liquidate, said Paul Ehinger, an independent forest products consultant in Eugene. All that's left are Crown Pacific's three sawmills, five supply yards and its timberland and other assets, not enough to generate revenue to pay off its massive debt of $596 million, he said.
'Their debt has been so big and the market so lousy that there was no other choice. It was a matter of not if, just when,' Ehinger said of the bankruptcy, adding that the company was 'poorly managed.'
It is the third time in three years Crown Pacific has had to explore restructuring options.
Company spokesman Brian Gard said Crown Pacific expects to keep operating through the Chapter 11 process and re-emerge stronger. The reorganization plan will look at all aspects of the company, from selling assets to corporate management, he said.
Company executives had been in restructuring talks with creditors for months before filing Sunday for protection from creditors in U.S. Bankruptcy Court in Phoenix. Crown Pacific Ñ which had violated its loan covenants with lenders Ñ filed a day before its recapitalization deadline ended.
Its latest round of emergency financing came from CIT Group Inc. Crown Pacific previously had arranged for a $40 million line of credit in April 2002. It recently had hired the Blackstone Group LP to explore various restructuring options.
The company reported $601 million of assets and $596 million in debts.
Though headquartered in Portland, Crown Pacific chose to file in Phoenix, where its Alliance Lumber distribution network is located.
Alliance generates about half of Crown Pacific's annual revenue.
Negotiations with creditors will continue but under the court's direction, Gard said. Crown Pacific is represented by Hugh Ray, a partner at Andrews & Kurth LLP law firm in Houston.
'The goal is to keep Crown Pacific together,' Gard said. 'Our hope is to keep the same managers. The goal is to come out on the other side.'
The Tribune first reported last January that the company was searching for a buyer to dig out from debt and mounting quarterly losses. In the quarter ending March 31, Crown Pacific reported a loss of $16.5 million on revenues of $106 million. The company had not paid dividends since December 2000 and had an annual loss last year of $58 million.
More recently, the company was dropped from the New York Stock Exchange and moved to over-the-counter bulletin board. Its stock closed Monday at 18 cents, down 40 percent on the day.