90 



separate entities. The majority of our debt today is investment 

 grade rated. 



Mr. POMEROY. What was the capitalization of these new compa- 

 nies? 



Mr. Campbell. Let's see, I think one of them is at $385 milUon. 



Mr. POMEROY. Not the amounts, how were they capitalized? 



Mr. Campbell. With bonds and indentures. 



Mr. POMEROY. What happened to the assets of the old company? 



Mr. Campbell. Well, they are still under the umbrella of Pacific 

 Lumber Company. We have three subcompanies now and there is 

 a consolidation of the financial reporting at the end of every cal- 

 culating period. 



Mr. PoMEROY. For corporate structure purposes the assets will 

 actually be listed of the separate three subcompanies? 



Mr. Campbell. Yes, but they are all consolidated back up into 

 Pacific Lumber Company. 



Mr. POMEROY. You mentioned the additional financing inter- 

 jected into the companies and how was this managed? Through the 

 sale of long-term bonds? 



Mr. Campbell. Long-term bonds. We have much lower interest 

 rates than we had previously and we have much longer maturities. 



Mr. POMEROY. What is the backing for the long-term bonds? 



Mr. Campbell. Timber. We are in the timber business. 



Mr. POMEROY. Mr. Campbell, would it be a fair statement to say 

 that the company. Pacific Lumber Company, the company you have 

 been with for 24 years, has in fact even merged even more leverage 

 after the financial maneuvering of this year? 



Mr. Campbell. I don't believe we have anjrwhere near the finan- 

 cial pressure that we had previously to the refinancing package. 



Mr. POMEROY. Not in terms of short-term interest rate, but the 

 long-term bond obligation has increased substantiallj'. 



Mr. Campbell. Yes, but that is to our advantage. I mean you pay 

 out much slower over time as your forest is regenerating constantly 

 at very good levels, a very high percentage and prices are going up 

 as well so you have a double 



Mr. POMEROY. Relative again to the relationship between debt le- 

 verage and business plan, what level of cutting relative to the 

 former Pacific Lumber must you maintain in order to meet your 

 bond obligations? 



Mr. Campbell. We did a long-term study in 1986. We brought 

 in outside consultants at the recommendation of other outside con- 

 sultants. We redid our business plan. We felt that we could in- 

 crease our harvest over a 20-year period because of our very high 

 inventory levels of timber and that at some point out here in 2007, 

 2008, we would be on sustained yield in perpetuity. 



Mr. POMEROY. Were your harvesting considerations revisited in 

 light of your obligations to your new bondholders? 



Mr. Campbell. Are you talking in 1986 or now? 



Mr. POMEROY. Now. 



Mr. Campbell. No. That is we have remained on the business 

 plan that we developed in 1986, subject to market fluctuations as 

 well. I mean, sometimes you can't sell all the lumber that you cut. 

 So when you are in that position, you reduce your harvest. 



