Montreal, Maine & Atlantic Railway Ltd. is close to securing a loan that would allow the company to pay for its bankruptcy case and remain in business without draining it of funds that should go to victims of a disastrous July 6 derailment, an attorney representing the railroad said.
During a hearing Wednesday in U.S. Bankruptcy Court for the District of Maine, railroad trustee Robert Keach, a Portland attorney, told Judge Louis Kornreich that he planned to file a motion soon about the proposed financing deal. Keach said it was too soon to specify the lender.
“If the arrangement that we have negotiated comes to fruition, and I believe that it will, that we have found a way to administer these cases in a way that won’t dilute recoveries to any creditors or victims,” he said.
Kornreich expressed concern during an Aug. 22 hearing that litigation and other administrative costs associated with the bankruptcy case would leave little to no money for victims of the recent derailment.
On July 6, an unmanned Montreal, Maine & Atlantic train loaded with crude oil rolled downhill into the town of Lac-Megantic, Quebec, derailed and exploded, killing 47 people and destroying 40 buildings in the heart of town.
Operation of the railway, which runs from Quebec toward New Brunswick through central Maine, has been in jeopardy since the derailment. The company filed for Chapter 11 bankruptcy reorganization about a month after the accident.
Its Canadian sister company, Montreal, Maine & Atlantic Canada Co., filed a similar action in the Superior Court of Quebec in Montreal.
Civil lawsuits and a criminal investigation also are under way in Canada.
Lawyers in the bankruptcy case have said their primary goals are to sell the railroad and compensate victims of the derailment and their families.
During Wednesday’s hearing, Kornreich also approved a set of procedures that would allow participants in the U.S. and Canadian bankruptcy cases to coordinate efforts and share information. A Canadian judge was expected to rule Wednesday on a similar motion.
Because the bankruptcy case spans two countries, is connected to a human tragedy with numerous victims and involves a highly regulated railroad, it could take years to resolve.
Keach was appointed in August by the U.S. Trustee’s Office to oversee the company’s finances throughout the bankruptcy proceeding and keep the case on track toward a resolution.
Keach said Wednesday that his goal is to stabilize the railroad’s financial situation in anticipation of selling the company to resolve the bankruptcy. No buyer has been identified yet, he said.
According to documents filed in bankruptcy court, the railway company is worth $50 million to $100 million and owes at least $37 million to its largest creditors. In all, the company estimates that it has more than 200 unsecured creditors, which are businesses or individuals who are owed money but do not have collateral or legal means to force repayment.
The railroad’s chairman, Ed Burkhardt, said in a written statement that the company’s obligations exceed the value of its assets, including its expected insurance payouts from the accident.
Keach has said the railroad has enough money to operate on a break-even basis in the near future, and he has advised the other parties in the case to cooperate to complete the bankruptcy process as quickly as possible.
The railroad, based in Hermon, owns 512 miles of line in Maine and Canada. Most of its workers have been laid off since the accident disrupted operations.
Because railroads are critical for commerce and have monopoly status, U.S. bankruptcy law has special rules to ensure that they continue to operate and are not liquidated. In fact, railroads are not allowed to file for Chapter 7 bankruptcy, which is used when a company closes its business and sells off its assets.
If a railroad ceases operations, the federal Surface Transportation Board has the authority to order another railroad to provide service to its customers.
The next hearing in the bankruptcy case is scheduled for 10 a.m. Sept. 13 at the U.S. Bankruptcy Court in Bangor.
J. Craig Anderson can be contacted at 791-6390 or at: