Business Notes

"Debt-for-nature" swaps are the method of the moment for well-heeled environmentalists wishing to put parts of the Third World off limits to development. If it works with debt-straitened countries, why not with similarly strapped companies? That's the reasoning behind the latest swap plan, intended to protect a 2,900-acre redwood forest in Northern California's Humboldt County.

The main player is Maxxam, a Houston conglomerate that issued junk bonds in order to purchase the lumber firm that formerly owned the forest. Among the bond buyers: the infamous Columbia Savings & Loan of Beverly Hills, which was seized by the government in January. The seizure has left Uncle Sam holding Columbia's share of the Maxxam bonds. Maxxam, left short of cash by the takeover, has increased the cutting and selling of the redwood timber, thus infuriating local conservationists.

In an effort to protect the forest, California wants to buy from the Federal Government some $60 million of Maxxam bonds, hopefully at a discount. The state would then hand the bonds back to Maxxam, freeing the company from ever having to repay that debt. In return for the bonds and an undetermined additional payment, Maxxam would give the forest to the state.

Happy ending: the Federal Government unloads some bonds, Maxxam gets rid of some debt, Californians get to keep some 1,700-year-old redwoods and Governor Pete Wilson upgrades his image with environmentalists, who opposed his election.