Crown Pacific Disburse-First Motion.Pdf
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1 OSBORN MALEDON, P.A. 2929 North Central Avenue, Suite 2100 2 Phoenix, Arizona 85012-2794 Telephone: (602) 640-9302 3 Facsimile: (602) 640-6047 4 C. Taylor Ashworth – Arizona State Bar No. 010143 Alisa C. Lacey – Arizona State Bar No. 010571 5 Email: bkecf @omlaw.com 6 ANDREWS & KURTH L.L.P. 600 Travis, Suite 4200 7 Houston, Texas 77002 Telephone: (713) 220-4200 8 Facsimile: (713) 220-4285 9 Hugh M. Ray – Texas State Bar No. 16611000 John J. Sparacino – Texas State Bar No. 18873700 10 C. John M. Melissinos – California State Bar No. 149224 Email: [email protected] 11 Attorneys for CP Acquisition Co., et al. 12 Debtors and Debtors-in-Possession 13 UNITED STATES BANKRUPTCY COURT DISTRICT OF ARIZONA 14 In re: Chapter 11 Proceedings 15 CP ACQUISITION CO., et al., Case No. 03-11258-PHX-RJH 16 Debtors. (Jointly Administered with Case 17 Nos. 03-11259-PHX-RJH through 03-11263-PHX-RJH) 18 19 THIS FILING APPLIES TO: 20 ALL DEBTORS SPECIFIED DEBTORS 21 22 23 MOTION OF DEBTORS FOR ADMINISTRATIVE ORDER UNDER 11 U.S.C. §§ 105(a), 330, 331 AND 503 ESTABLISHING 24 PROCEDURES FOR COMPENSATION AND REIMBURSEMENT OF PROFESSIONALS AND REIMBURSEMENT OF COMMITTEE MEMBERS 25 26 -1- 11430.3 – 439300.1 HOU:2155043.4 1 TO THE HONORABLE RANDOLPH J. HAINES, UNITED STATES BANKRUPTCY 2 JUDGE: 3 CP Acquisition Co. and its affiliates that are debtors and debtors-in-possession in the 4 above-captioned cases (the “Debtors”)1 file this Motion of Debtors for Administrative Order 5 under 11 U.S.C. §§ 105(a), 330, 331 and 503 Establishing Procedures for Compensation and 6 Reimbursement of Professionals and Reimbursement of Committee Members (the “Motion”). In 7 support of this Motion, the Debtors respectfully state as follows: 8 I. BACKGROUND 9 A. The Chapter 11 Filings 10 1. On June 29, 2003 (the “Petition Date”), each of the Debtors filed with this Court a 11 voluntary petition for relief under Chapter 11 of title 11 of the United States Code (the 12 “Bankruptcy Code”). Each of the Debtor remain in possession of its assets and properties as 13 debtor-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 14 2. To date, no trustee, examiner or official committee has been appointed in any of 15 the cases. 16 3. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 17 1334. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A). Venue is proper in this Court 18 under 28 U.S.C. §§ 1408 and 1409. The statutory predicates for the relief requested herein are 19 sections 105, 330, 331 and 503(b)(3)(F) of the Bankruptcy Code. 20 B. The Debtors and Their Operations 21 4. Crown Pacific Limited Partnership (“CPLP”) is a limited partnership duly 22 organized and existing under the laws of the State of Delaware. Substantially all of the Debtors’ 23 operations, as described below, are conducted by and through CPLP. CPLP is predominantly 24 1 The Debtors consist of CP Acquisition Co., Crown Pacific Limited Partnership, CP Air, Inc., CP 25 Acquisition II Co., CP Acquisition III Co., and Crown Pacific Partners, L.P. 26 -2- 11430.3 – 439300.1 HOU:2155043.4 1 owned by Crown Pacific Partners, L.P. (“CPP” or “Parent”), a publicly traded Delaware limited 2 partnership that substantially functions as a holding company. CP Air, Inc. (“CP Air”) is a 3 wholly-owned subsidiary of CPP. CP Air has virtually no assets, liabilities or operations. CP 4 Acquisition Co. (“CP Acquisition”) is a wholly-owned subsidiary of CP Air formed for the 5 purpose of acquiring the entity that now comprises CPLP’s “Alliance Lumber” (defined below) 6 operations in and around Phoenix, Arizona. CP Acquisition has virtually no assets, liabilities or 7 operations. CP Acquisition II Co. (“CP Acquisition II”) is a wholly-owned subsidiary of CP Air 8 formed for the purpose of acquiring the entity that now comprises CPLP’s “Alliance Lumber” 9 operations in Nevada. CP Acquisition II has virtually no assets, liabilities or operations. 10 CP Acquisition III Co. (“CP Acquisition III”) is a wholly-owned subsidiary of CP Air formed for 11 the purpose of acquiring the entity that comprised CPLP’s recently sold Albuquerque, New 12 Mexico trading and distribution operations. CP Acquisition III has virtually no assets, liabilities 13 or operations. CPP and CPLP are each managed by Crown Pacific Management Limited 14 Partnership, a Delaware limited partnership (“CP Management” or “Managing General Partner”), 15 which is the general partner of CPLP and one of two general partners of CPP. 16 5. Through CPLP’s three (3) business segments, as described below, the Debtors’ 17 business consists primarily of growing and harvesting timber for sale as logs in domestic and 18 export markets and the manufacturing and selling of lumber and other wood products. As 19 described below, in April and May of this year, CPLP sold the assets of a fourth business 20 segment, its former trading and distribution business. 21 6. Timberlands Segment. In connection with the Debtor’s “timberlands business 22 segment,” CPLP owns or controls in excess of 524,000 acres of timberland, which contains a 23 total merchantable timber inventory of approximately 2.5 billion board feet, located in Oregon 24 and Washington. CPLP’s timber holdings are primarily comprised of softwood species, 25 including Douglas fir, hemlock, white fir, ponderosa pine, lodgepole pine, cedar and sugar pine, 26 but also contain a significant volume of red alder. Due to its long fiber, strength, flexibility and -3- 11430.3 – 439300.1 HOU:2155043.4 1 other characteristics, softwood species are primarily used for construction lumber and plywood. 2 The timberlands are considered healthy and vigorous and are stocked with a variety of age class 3 stands. CPLP’s substantial timber resources help reduce reliance on third-party log sources to 4 supply CPLP’s manufacturing facilities (described below), which the Debtors believe provides a 5 significant competitive advantage over lumber manufacturers without a supply of fee timber. 6 During 2002 and 2001, CPLP’s timberlands provided the Oregon manufacturing facilities with 7 41% and 30%, respectively, and the Washington manufacturing facilities with 45% and 68%, 8 respectively, of their log requirements. In total, approximately 52% of the timber harvested by 9 CPLP was utilized in its manufacturing facilities for the production of lumber during 2002. The 10 remaining timber was sold in third party domestic and export log markets, which are highly 11 competitive with respect to price, quality of products, distribution and other factors. 12 7. Manufacturing Segment. In CPLP’s “manufacturing business segment,” CPLP 13 produces an array of lumber products. These operations are conducted at CPLP’s three (3) 14 converting mills, one (1) each located in Gilchrist, Oregon (property owned by CPLP in fee), 15 Port Angeles, Washington (real property and certain improvements and equipment owned by 16 CPLP with majority of improvements leased by CPLP), and Marysville, Washington (property 17 owned by CPLP in fee). CPLP’s Oregon facility, which was substantially modernized during 18 late 2000 and early 2001, primarily produces dimension lumber products (considered a 19 commodity and sold to a wide number of customers, primarily home builders) and some 20 industrial grade lumber products (primarily sold to remanufacturers who produce doors, 21 windows and other specialty products). The two Washington mills primarily produce 22 commodity-grade studs for the construction industry. Domestic demand for the lumber and 23 manufactured wood products produced by CPLP’s mills is directly affected by the level of 24 residential construction activity. CPLP competes in the domestic lumber markets primarily with 25 other U.S. and Canadian lumber producers. Competitive factors in the commodity-grade lumber 26 -4- 11430.3 – 439300.1 HOU:2155043.4 1 market are based on pricing strategies, while sales of industrial lumber are based on quality, 2 species and price. 3 8. Alliance Lumber Segment. CPLP’s “Alliance Lumber business segment,” which 4 is based in Phoenix, Arizona, consists of five (5) contractor supply yards, three in Phoenix, 5 Arizona, and one each in Las Vegas and Sparks, Nevada. Each of the supply yards are leased by 6 CPLP, except for the Reno yard which CPLP owns. These supply yards effect both wholesale 7 and retail sales of lumber and wood products, with customers predominantly comprised of 8 construction contractors. CPLP manufactures many of the products sold from the Alliance 9 Lumber yards, however, a substantial amount of the sales are products manufactured by other 10 parties. CPLP competes in the wholesale sales market with other wholesale companies, forest 11 products companies and distributors on the basis of price, product availability and delivery and 12 service. In 2002, the Alliance Lumber segment generated approximately 37% of CPLP’s total 13 revenues. 14 9. Former Trading and Distribution Segment. As noted above, in April and May of 15 this year, CPLP completed sales of the assets of its “trading and distribution business segment.” 16 This segment was a forest product wholesale trading operation based in Eugene, Oregon, with 17 satellite locations in Phoenix, Arizona, Ogden, Utah, Cameron Park, California, Tustin, 18 California, and Albuquerque, New Mexico (which also operated as a wholesale distributor). The 19 trading and distribution business engaged in the wholesale purchase and sale of lumber and other 20 wood products. In April, the assets of the Eugene portion of the business were sold to a third 21 party purchaser. In May, CPLP closed the sale of the assets related to the Albuquerque 22 operations to parties affiliated with the Albuquerque operations.