New leader of former MMA says up to $10 million in track investments on the way

Posted May 15, 2014, at 4:27 p.m.
Last modified May 16, 2014, at 9:35 a.m.

BANGOR, Maine — As sale documents were being completed, the man taking over the former Montreal, Maine and Atlantic Railway was at the Spectacular Events Center in Bangor on Thursday afternoon to share the new management’s vision for the railroad that fell into bankruptcy after a tragic 2013 crash that killed 47 people in a Quebec town.

John Giles, president and CEO of the renamed Central Maine and Quebec Railway, said in a phone interview Thursday that achieving that vision will require up to $10 million in track investments this year and use a boosted sales and marketing staff to find new customers.

“You don’t flip a switch,” said Giles, who previously managed other railroads acquired by New York-based buyer Fortress Investment Group. “You have to earn a lot of that trust, and the journey began today, which is also the first day we’ve owned the company.”

Giles said all that remained to complete the sale Thursday afternoon was signing documents to be couriered to Portland and executed by Robert Keach, the bankruptcy trustee. Keach said last week that he was working with Fortress representatives toward a hard deadline of Thursday to close the $15.85 million sale, which a bankruptcy judge approved in January. The investment firm acquired the Hermon-based railroad through its subsidiary Railroad Acquisition Holdings.

Sale of the former Montreal, Maine and Atlantic’s Canadian assets is still pending federal regulatory approval in that country. Giles said he did not have a sense of when the company might receive approval to buy those Canadian assets.

Giles said his first priorities were improving the areas of track in most dire need of repair and putting into motion more than a dozen newly leased General Motors locomotives to replace the General Electric fleet that the company rejected in the bankruptcy sale. Giles said the company also rejected some contracts as part of the sale, but the locomotives were the largest asset left to bank ownership.

The replacement locomotives are more efficient, reliable and safe, according to Giles. In the wake of the July 2013 disaster that destroyed most of downtown Lac-Megantic, Quebec, safety is a top concern, he said.

The former Montreal, Maine and Atlantic Railway regularly used just one-person crews on its trains, a practice that U.S. regulators in April said would no longer be allowed, for safety reasons. Giles said train companies he’s managed for Fortress in the past have avoided one-person crews.

“That’s not the way we roll,” Giles said. “We want two people on each and every train.”

He said the company is finalizing plans for other areas where it plans to make capital improvements this year, which he estimated would be about $8 million to $10 million for track improvements before winter puts a damper on repairs.

After a tour of the company’s track in March, Giles said the line running north and south from Searsport to Brownville Junction is in “pretty good shape.” The east-west sections of the track needs the most work, with a section in Canada between Sherbrooke and Farnham needing “a lot of love and attention and money.”

The new investments will be a key part of a boosted sales staff’s pitch to prospective and past customers, he said.

“Those are new efforts that this railroad hasn’t seen in a number of years,” Giles said.

He said that the company one month ago doubled its marketing and sales staff — from two people to four — in order to prepare for the sale and to work on winning back old customers and generating new business. The 69-employee company has no plans to hire more people in the near-term, he said.

Before the Lac-Megantic disaster, the company had nearly 100 employees in Maine. After the disaster last summer, the company laid off 79 workers, including 60 in Maine.

Looking to re-establish the company’s customer base, Giles said he doesn’t expect the railway’s primary markets to change. He said it will continue to serve customers shipping lumber, salt, wood materials and fuels.

“To some, we’ll have to prove ourselves, and it will take a little while, but it’s a journey,” Giles said.

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