August 8, 2013

Disastrous crash forces Maine railway into bankruptcy

The company files Chapter 11 as it seeks a buyer or tries to straighten out its affairs.

By Tom Bell
Staff Writer

and J. Craig Anderson
Staff Writer

(Continued from page 1)

click image to enlarge

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

click image to enlarge

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.

Related Documents

Montreal, Maine & Atlantic's bankruptcy petition
MMA board of directors' resolution on bankruptcy
Motion by Montreal, Maine & Atlantic

Several manufacturers in Maine depend on the railroad to deliver products to customers around the country.

Steve Banahan, sales and transportation manager for Moose River Lumber in Moose River, said he hopes the line will reopen so his company can ship to Montreal.

The company processes spruce fir from Maine and Quebec and turns it into dimension lumber for building houses. It produces about 120 million board feet per year, according to its website.

The company relies on the railroad for bringing logs in as well as shipping lumber out. The lumber is shipped west, passing through Lac-Megantic on its way to Montreal, before being distributed along the eastern seaboard, Banahan said.

With the Lac-Megantic rail yard closed, lumber must travel back east to Brownville Junction, which costs about $500 to $1,500 more per car. In the course of a year, the company ships about 150 to 200 cars, Banahan said.

"We've felt the impact both on the inbound side, with our raw materials, as well as on the outbound side, trying to get our product to other markets," he said.

In a bankruptcy proceeding, secured creditors -- those with collateral for the money they are owed -- are at the front of the line to be repaid by the company. Unsecured creditors often receive a far smaller portion of what they are owed, if anything.

The railroad's largest secured creditor is the federal government, according to bankruptcy documents.

The railroad still owes $27.5 million on a $34 million Federal Railroad Administration loan issued in March 2005, the documents said. The railroad administration would have the legal right to take possession of all real estate owned by the company if it defaulted on the loan, according to the court motion filed by the railroad.

The company's second-largest secured creditor is Wheeling & Lake Erie Railway Co., which is owed $6 million on a maxed-out line of credit.

The railroad's largest unsecured creditor is New Brunswick Southern Railway Company Ltd., which claims it is owed $2 million. Montreal, Maine & Atlantic is disputing that debt, court documents show.

The debt to New Brunswick Southern is likely for its services as a "switching carrier," which delivers the Montreal, Maine & Atlantic cars to and from the Irving Oil refinery in New Brunswick, said Hardenbergh, the Freeport publisher.

The second-largest unsecured creditor is Burkhardt, who is owed about $786,000 for "indemnification and/or contribution in connection with wrongful death litigation and other claims," a likely reference to what Burkhardt has paid out of his own pocket in wrongful-death lawsuits filed by residents of Lac-Megantic.

-- Rachel Ohm of the Morning Sentinel contributed to this report.

Tom Bell can be contacted at 791-6369 or at:

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