Sunday, April 20, 2014
An unidentified company submitted an offer Thursday to buy the Montreal, Maine & Atlantic Railway, becoming the second party vying to purchase the bankrupt rail carrier.
A Montreal, Maine & Atlantic Railway crew repairs tracks in Brownville last July. An unidentified company submitted an offer Thursday to purchase the bankrupt rail carrier. If enough qualified bids are received, the railroad will be sold at auction next Tuesday.
Photo by Tom Bell
2002: The Montreal, Maine & Atlantic Railway is formed out of the bankrupt Iron Road Railways, a holding company that owned the Bangor & Aroostook Railroad.
JULY 6, 2013: Forty-seven people are killed in Lac Megantic, Quebec after an MM&A train derails and explodes.
AUG. 7, 2013: The MM&A files for bankruptcy protection in U.S. and Canadian courts.
JAN. 17, 2014: Final bids are due to buy the MM&A out of bankruptcy.
JAN. 21, 2014: If enough qualified bids are received, the MM&A will be sold at auction.
The company’s offer was one of a flurry of bids expected before a 5 p.m. deadline Friday, according to Robert Keach, the railroad’s court-appointed trustee.
If enough qualified bids are received, the railroad will be sold at auction Tuesday.
Keach declined to identify the most recent bidder or to be more specific about the number of interested buyers, saying merely that he expects “some” bids.
The number of qualified bidders should be enough to go forward with the planned auction of the railroad, he said.
“I will be surprised if we don’t have an auction,” said Keach, an attorney with Bernstein Shur in Portland.
Last month, Keach said 18 companies had expressed an interest in the railroad, which sought bankruptcy protection after one of its trains derailed in Lac-Megantic, Quebec, causing an explosion and fire that killed 47 people. The train was hauling 72 tanker cars carrying oil.
The Hermon-based company operates on more than 500 miles of tracks in Quebec, Maine and a small section of Vermont, and has sought protection from creditors in courts in both countries.
Chief Judge Louis Kornreich of the U.S. Bankruptcy Court in Bangor last month chose Fortress Investment Group as the “stalking horse” bidder, setting a minimum price to prevent low-ball bids. Fortress submitted a bid of $14.25 million.
The winner of an auction won’t necessarily be the highest bidder. Bankrupt railroads have unique status under federal law, because railroads are monopolies and are considered critical to commerce. Keach said he must also consider the “public interest” in maintaining a railroad as an ongoing business.
Keach said the auction will be a private affair, attended only by representatives of the bidders, along with a court-appointed monitor of the railway’s Canadian affiliate, the Montreal, Maine & Atlantic Canada Co., and a court-appointed bankruptcy specialist who represents a victims’ committee in U.S. court proceedings.
The environmental clean-up of the crash site and nearby river is expected to cost about $200 million.
The railroad carried just $25 million in liability insurance when the crash occurred.
Luc Despins, who represents the victims’ committee, said his primary goal is to get as much money from a sale as possible.
“We are hoping for a robust auction,” he said.
The railroad is still operating, and its trains run between Millinocket and Searsport in Maine, and between Brownville, Maine, and Montreal, Quebec.
The railroad’s assets include a large railroad repair facility in Milo and rail yard in Brownville Junction.
At the time of the July 6 accident, the railroad had about 180 employees in the two countries.
In addition to the victims, the railroad owes about $37 million to its largest secured creditors, including $28 million owed to the Federal Railroad Administration. However, the administration has agreed to forgo $5 million of that debt to pay for the railroad’s bankruptcy case.
The Wheeling & Lake Erie Railway, the second-largest secured creditor, is owed $6 million.
In addition, several hundred companies, agencies and individuals are listed as unsecured creditors in court documents.
The top 20 unsecured creditors claim to be owed about $5.6 million.
How to distribute proceeds from the sale will be determined by the trustee and bankruptcy court over the next several months, said Jim Howard, an attorney and trustee for the Montreal, Maine & Atlantic’s predecessor, the Bangor and Aroostook Railroad, during its bankruptcy proceedings in 2002.
“It’s impossible for anybody at this point to predict,” he said.
Chicago-based Rail World bought the Bangor & Aroostook Railroad’s lines in 2002 and incorporated the lines into the newly formed Montreal, Maine and Atlantic Railway.
The winner of Tuesday’s auction won’t be made public until Thursday, when the U.S. District Court in Bangor and the Superior Court of Quebec in Sherbrook hold simultaneous proceedings starting at 10 a.m.
Tom Bell can be contacted at 791-6369 or at:
click image to enlarge