Thursday, April 17, 2014
The Montreal, Maine & Atlantic Railway filed for bankruptcy Wednesday, just 33 days after one of its unattended trains rolled down a hill and derailed, causing explosions that killed 47 people in a town in Quebec.
A crew from Montreal, Maine & Atlantic Railway works to put a derailed locomotive back on the tracks in Brownville on Wednesday, July 31, 2013. The Maine-based company filed for bankruptcy Wednesday, Aug. 7, 2013, just 33 days after one of its unattended trains rolled down a hill and derailed, causing explosions that killed 47 people in Lac-Megantic, Quebec.
Tom Bell / Staff Writer
Rail World Inc. President Edward Burkhardt speaks to the media as he tours the devastation in Lac-Megantic, Quebec, on July 10, 2013. Rail World is the parent company of the Montreal, Maine & Atlantic Railway.
The filing gives the company "breathing space" as it searches for a buyer or works to straighten out its affairs so it can continue operating, said the railroad's attorney, Roger Clement of Verrill Dana in Portland.
He said the Chapter 11 bankruptcy filing also provides a fair process for handling the many claims that have emerged since the accident.
There have been discussions with potential buyers, but nothing has "jelled," Clement said. A decision about selling the railroad may be made over the next few weeks, he said.
According to documents filed Wednesday in U.S. Bankruptcy Court for the District of Maine, the railway company is worth $50 million to $100 million and owes about $39 million to its largest creditors. In all, the company estimated 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.
Several lawsuits also have been filed since the accident, including a potential class action by victims and by family members of victims from the town, Lac-Megantic.
The railroad's chairman, Ed Burkhardt, said in a written statement that the company's obligations now exceed the value of its assets, including its expected insurance payouts as a result of the accident.
The bankruptcy filing, he said, is the "best way to ensure fairness of treatment to all in these tragic circumstances."
The railroad owns 512 miles of line and has 54 employees in Maine and 34 employees in Canada. Most of its workers have been laid off since the accident disrupted operations. Its headquarters are in Hermon.
Because it operates in two countries, the railroad consists of two companies, the Montreal, Maine & Atlantic Canada Co. in Canada and the Montreal, Maine & Atlantic Railway, Ltd. in the United States. Each company has its own board of directors, and Burkhardt is the chairman of both boards.
On Wednesday, the Canadian company filed for bankruptcy under Canadian law in Superior Court of Qu?c in Montreal, while its sister company in Maine filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
Because railroads are critical for commerce and have monopoly status, U.S. bankruptcy law has special rules to ensure that railroads continue to operate and are not liquidated. In fact, railroads are not allowed to file for Chapter 7, which is used when a company closes its business and sells off its assets.
If the railroad ceases operations, the federal Surface Transportation Board has the authority to step in and order another railroad to provide service to its customers, said Chalmers "Chop" Hardenbergh of Freeport, publisher of Atlantic Northeast Rails & Ports, a trade publication.
Burkhardt said essential rail services will continue at all stations in Qu?c, Maine and Vermont, with the exception of Lac-Megantic itself because the rail yard is under the control of authorities investigating the accident.
Gov. Paul LePage said in a written statement that the Maine Department of Transportation will actively participate in the bankruptcy proceedings, and also in any related regulatory proceedings to protect the rights of shippers to receive service.
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