Creditor of bankrupt Maine railway sues for its place in payout line

Posted Oct. 10, 2013, at 7:33 p.m.

The second-largest secured creditor of the bankrupt Maine-based railway operator whose runaway train killed 47 people in Canada in July wants to get the railway’s money first.

Wheeling & Lake Erie Railway filed a lawsuit in U.S. Bankruptcy Court in Bangor on Tuesday asking Judge Louis Kornreich to determine the order in which Montreal, Maine and Atlantic’s Railway’s creditors get their share of what they are owed when the bankruptcy is made final, officials said.

Robert Keach, the court-appointed trustee representing MMA, said the lawsuit “was a typical issue” in the ongoing Chapter 11 proceedings.

“It’s actually of no great import,” Keach said Thursday. “If we actually had this money, if the insurance company had paid the business interruption [insurance coverage] money, we would have sought the same thing” — to determine the order in which creditors would be paid.

But Traveler’s, the insurance company insuring MMA, hasn’t yet agreed that it should pay business interruption coverage, so Wheeling’s action is probably premature, Keach said.

Kornreich approved a $3 million loan on Wednesday from Camden National Bank that will allow Montreal, Maine and Atlantic to continue operating with two-man crews running the trains. The Hermon-based railway has been using a $6 million line of credit, provided by Ohio-based Wheeling & Lake Erie, to continue operating since it filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court in Bangor and Canada on Aug. 7.

Keach said Wednesday that it would continue using that cash collateral to fund operations once a new agreement is worked out with Wheeling’s attorneys.

The railway sought bankruptcy protection a month after one of its trains rolled driverless down a hill before derailing in the middle of the town of Lac-Megantic, causing the fiery explosion that killed 47 people and destroyed the village’s central business district.

BDN writer Judy Harrison contributed to this report.