Silver Bay Logging files for bankruptcy protection

Wrangell sawmill would stay in operation

Posted: Monday, February 03, 2003

Wrangell-based Silver Bay Logging has filed for bankruptcy protection, citing depressed lumber prices and increased costs of harvesting federal timber in Southeast Alaska.

The company filed for Chapter 11 bankruptcy protection, which will free it from the threat of creditors' lawsuits while it reorganizes. Under current plans, Silver Bay would continue to run its Wrangell sawmill, company President Dick Buhler said in a press release.

The company has been selling some real estate holdings and equipment during the past 18 months to pay its creditors.

"There certainly is enough value in the assets of the company to pay our debts, but we need more time to liquidate them in today's miserable economic conditions," Buhler said. "The recession has made it very difficult to find buyers for our surplus real estate, aircraft and logging equipment."

Errol Champion of Juneau, general manager of the company's aviation division, said total liabilities are just over $5 million.

"No one's crystal ball is so clear to say with absolute certainly, but we intend to operate as we have in previous seasons," he said.

The company plans to employ about 200 people in its logging, sawmill, marine and aviation divisions this summer. In the late 1990s, the company had upward of 500 employees, Champion said. Silver Bay has about 10 employees in Juneau.

Silver Bay plans to process 20 million board feet of wood and 5 million board feet of wood chips this year. The company has nine timber sale contracts with the U.S. Forest Service with a volume of 74 million board feet. It also has a state sale and one city sale that contain another 4 million board feet of wood.

Silver Bay is an important part of Southeast Alaska's timber industry, said Owen Graham, executive director of the Alaska Forest Association.

"Silver Bay is the largest logging company left in Southeast," he said. "I'm hopeful they can get reorganized and go forward. I've got my fingers crossed."

Part of the company's problems are tied to a 2001 court injunction that limits logging in roadless areas of the Tongass National Forest until the Forest Service completes a wilderness review, said Graham.

"The No. 1 thing is timber supply," he said. "They typically logged more than 100 million board feet a year. They've only been able to log 20 percent of that for the last two or three years because of the injunction."

Silver Bay, which started in Alaska in 1974, purchased the Wrangell mill from Japanese-owned Alaska Pulp Corp. in 1998. That mill produces "rough-cut" or primary manufactured wood that is sold to companies that produce doorjambs, window sashes and other special-application wood products, Champion said.

Silver Bay operates one of three medium-to-large-sized mills in Southeast Alaska. The others are Viking Lumber on Prince of Wales Island and Pacific Log and Lumber in Ketchikan. In addition, Icy Strait Lumber Co.-Whitestone Logging has a mill in Hoonah. Gateway Forest Products' mill in Ketchikan closed in 2001 after the company filed for bankruptcy.

• Joanna Markell can be reached at joannam@juneauempire.com.



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