MMA railway sale could be completed in December, says Quebec court documents
Oct 7, 2013 / 10:50 am
MONTREAL - The sale of the insolvent railway involved in last July's deadly explosion in Lac-Megantic, Que., could be wrapped up as early as mid-December once a formal process is established to award compensation to victims and other claimants, say court-appointed officials.
Court filings in Quebec say the U.S. trustee was entertaining interest from eight potential buyers for the Montreal, Maine & Atlantic Railway as of Friday. Seven of them had signed non-disclosure agreements to receive confidential data.
The Canadian monitor, Richter Advisory Group Inc., has been in contact with at least two groups in Canada.
The proposed sale schedule, which must be approved by the Quebec and U.S. bankruptcy courts, would see Oct. 31 as the deadline for expressions of interest from potential bidders.
A lead or "stalking horse" bidder would be chosen Nov. 15 and would set a floor price for other bidders. A formal auction of qualified bidders would take place Dec. 13, followed by court approval in Quebec and Bangor, Maine, three days later.
Investment banker, the Gordion Group, would conduct the sale.
Interested buyers would be able to bid on the railway's total assets or just those in Canada or the U.S. However, potential buyers must be prepared to continue providing service to customers in Quebec, Maine and Vermont.
MMA's American assets have been estimated at between US$50 million and US$100 million, while the Canadian assets were pegged at about $18 million.
Proceeds from the sale would also be complemented by a $25-million policy from XL Insurance.
Meanwhile, Travelers Property Casualty Company of America has paid $250,000 to repair the damaged track but is trying get out of the rest of its US$7.5 million coverage. A hearing on the issue is scheduled for Wednesday in Maine.
Officials had hoped a formal claims process will be approved by the courts by Nov. 30. Thousands of claims are expected to be filed, according to the monitor's third report.
While the claims process is still being considered, it will include a framework for the valuation and adjudication of the claims, development of a claim form and the scheduling of several information sessions.
The court officials are seeking extensions in creditor protection until mid to late January.
"The continued uncertainty surrounding the possible expiration of the stay or extension and the extension of the certificate of fitness has caused considerable uncertainty among the petitioner's customers," the report said.
Dozens of MMA's customers wrote letters stating that an end of railway services would "have significant financial consequences and would result in job losses in the regions and the closure of various companies."
Meanwhile, Camden National Bank has approved a US$3-million line of credit secured by the railway's U.S. assets to support ongoing operations. However, the funds wouldn't be enough for necessary track repairs or to pay lawyers and other professionals involved in the court proceedings.
The Quebec court is being asked to increase administrative charges to $2.5 million, while the U.S. trustee is seeking to allow up to US$5 million of fees to be paid from the railway's assets.
Forty-seven people were killed and much of the centre of the picturesque Quebec town was destroyed after an unmanned, runaway MMA train derailed and exploded July 6.
The crude oil that exploded in Lac-Megantic was as volatile as gasoline, but was documented as a less-dangerous product akin to diesel or bunker crude, the Transportation Safety Board has said.
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