DUFF & PHELPS: SCOTIA PACIFIC HOLDING COMPANY $385 MILLION 7.95 PERCENT FIXED RATE TIMBER COLLATERALIZED NOTES DUE 2015 RATED 'A'
CHICAGO, March 29 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has assigned a rating of `A' (Single-A) to the $385 million fixed-rate notes issued by the Scotia Pacific Holding Company. The Scotia Pacific Holding Company is a wholly-owned subsidiary of the Pacific Lumber Company. The notes pay interest at a fixed rate equal to 7.95 percent. Interest and principal on the notes are payable semi-annually on Jan. 20 and July 20 of each year, beginning July 20, 1993. The notes are secured by mortgaged property, which primarily includes the timberlands, contracts between Scotia Pacific and Pacific Lumber, and certain computer hardware and software previously utilized by Pacific Lumber. The timberlands consist of approximately 179,000 acres located on the northern California coast and contain primarily young growth and residual old growth redwood and Douglas-fir timber. Scotia Pacific's revenues are expected to be derived primarily from the sale of logs harvested from the timberlands for which it owns the cutting rights. These sales will primarily be to Pacific Lumber, however, Scotia Pacific can sell logs or standing timber from the timberlands to other third party purchasers. A minimum amount of note principal must be paid on or prior to each note payment date. This amount was determined by calculating the present value of expected net revenues from the sale of harvested logs under a stressed scenario. Duff & Phelps's `A' rating addresses the timely payment of interest and principal in accordance with the minimum amortization schedule. Principal may be repaid sooner than scheduled should timber harvests exceed Scotia's forecasted production. The `A' rating is based on an analysis of the initial quantity of timber in relation to the amount of timber production required to pay the notes; the historical timber production of Pacific Lumber; historical timber price levels relative to forecast price levels used in deriving expected note cash flows; the legal structure; and environmental concerns. The `A' stress scenario of cash flows reflects production declines of 40 percent from the initial harvest schedule developed by Scotia and price declines of approximately 16 percent from price levels for the six month period ended June 30, 1992, (or approximately 40 percent from current price levels). Regulatory and environmental issues play a significant role in the operation of timberlands. Scotia management believes that its timber harvesting practices comply with all applicable federal and state laws and regulations dealing with timber harvesting, including the protection of endangered species. Scotia is required to file Timber Harvest Plans (THPs) that conform to regulations and meet approval of the California Department of Forestry prior to the harvesting of any timber. To date, THPs that have been challenged by third party litigation have restricted Pacific Lumber's ability to harvest virgin old growth timber stands. The timberlands to be transferred to Scotia exclude harvesting rights with respect to virgin old growth redwood and Douglas-fir timber. Credit enhancement on this transaction consists of a liquidity account and the overcollateralization provided by the approximate initial amount of timber in relation to the timber harvest required to pay investors. The liquidity account equals approximately 10 percent of the pre-reserve note balance. The sum of the annual harvest levels that must be achieved in order to meet the minimum amortization is approximately 1.9 million Mbfe (thousand board feet equivalent) and the timberlands consist of in excess of 3.0 million Mbfe resulting in overcollateralization of approximately 58 percent. -0- 3/29/93 /CONTACT: Daniel J. Petrisko, 312-368-3185 or Andrew Leszczynski, 312-368-3177, both of Duff & Phelps Credit Rating Co./
CO: Scotia Pacific Holding Company ST: IN: PAP SU: RTG
WB -- NY102 -- 0718 03/29/93 17:06 EST
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|Date:||Mar 29, 1993|
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