Canadian authorities holding up sale of bankrupt Maine railway

Robert Keach, the Bernstein Shur attorney that was appointed the trustee overseeing Montreal, Maine and Atlantic Railway as the company works its way through bankruptcy, talks about a hearing on motions in the bankruptcy that was held on Sept. 4, 2013, at Federal Court in Bangor.
Robert Keach, the Bernstein Shur attorney that was appointed the trustee overseeing Montreal, Maine and Atlantic Railway as the company works its way through bankruptcy, talks about a hearing on motions in the bankruptcy that was held on Sept. 4, 2013, at Federal Court in Bangor. Buy Photo
Posted March 18, 2014, at 7:59 p.m.

American authorities have approved it, but the $15.85 million purchase of the Maine railroad forced into bankruptcy by the disastrous Lac-Megantic derailment last year is delayed, possibly until June, while Canadian authorities review the sale, the railroad’s court-appointed trustee said Tuesday.

The Canadian Transportation Agency and Transport Canada are still reviewing the purchase that would create the Central Maine and Quebec Railway from Montreal, Maine and Atlantic Railway of Hermon, said Robert Keach, MMA’s trustee in the bankruptcy proceedings.

“The delay is considered routine, and, in fact, the contingency for such a delay was built into the asset purchase agreement,” Keach said in an email on Tuesday. “All relevant insurance has been extended to June 1, and the current financing is sufficient to cover the anticipated delay.”

“I do not expect any impact on operations from the delay, and we expect prompt action by the regulatory authorities,” Keach added.

The federal Surface Transportation Board, which is the American regulatory agency overseeing the sale, approved it with a court filing on Tuesday, Keach said.

MMA filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court in Bangor on Aug. 7, 2013, a month after one of its trains rolled driverless down a hill before derailing in the middle of the town of Lac-Megantic, Quebec, causing an explosion that killed 47 people on July 6.

The Hermon-based railroad laid off 79 company workers, including 60 Americans, out of its approximately 120 employees in the wake of the runaway train disaster. About 30 were hired back thanks partly to a loan the company secured that would allow it to run through February.

Keach has said the sale is proceeding with the understanding that the company would hire to fill most of the positions vacated by the layoffs.

Central Maine and Quebec is a subsidiary of New York investment firm Fortress Investment Group, which won a bankruptcy auction for the bankrupt MMA’s assets on Jan. 21. It had expected the sale to be complete by the end of March.

John Giles, a consultant for Fortress and expected CEO of the new railway freight service, said in proposed sale documents released in January that the new railroad would have annual revenue exceeding $5 million, but not more than $22 million, and would “seek to recapture traffic formerly transported by MMA, which may have been diverted to motor carriage as a result of the interruption of MMA service following the Lac Megantic disaster.”

It remains unclear if those projected revenue figures are gross or adjusted. MMA’s historic gross revenue exceeded $22 million, especially after the railroad began carrying crude oil. In 2012, the first full year MMA carried crude oil, it posted $36 million in gross revenue, Keach has said. The year before, it posted $24 million.

Keach said in January that roughly 20 potential buyers, including Railroad Acquisition Holdings, emerged in the process to secure a stalking horse, some of whom visited the railroad company’s operations to peruse the assets.

 

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