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Bankrupt MM&A Railway Gets Lifeline to Continue Operating
10/09/2013   Reported By: Tom Porter

The beleaguered Montreal, Maine & Atlantic Railway company was thrown a lifeline today. At a bankruptcy hearing in Bangor this morning, a judge approved a $3 million loan from Camden National Bank to enable the Maine-based rail operator to stay afloat while its assets are sold. Tom Porter has more.

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Judge Louis Kornreich's decision to grant the $3 million line of credit was welcome news for Michael Fagone. He's an attorney with the legal firm overseeing MM&A's bankruptcy.

"The financing that was approved by the court today is critical to the continuing operation of the business during the coming months, while the trustee explores a sale of the railroad," Fagone says.

Montreal, Maine & Atlantic declared bankruptcy in early August, one month after the tragedy in Lac Megantic, Quebec, where one of its rail cars derailed and exploded, killing 47 people.

A number of potential suitors have emerged for MM&A. Portland-based attorney Robert Keach was appointed trustee of the company in August, to oversee its bankruptcy proceedings. He says eight companies have now expressed an interest in acquiring MM&A, seven of whom have signed non-disclosure agreements giving them access to confidential information.

Many of the suitors, says Keach, are well-known entities in the financial and raiI industries. "I can't identify who they are at the moment because these matters are confidential," he says, "but I can tell you that there is a very active process right now to get the various prospects the information they need, and to move the process forward. I'm still confident that this a process that can conclude by year-end, or very close to it."

Keach says he expects a so-called "stalking horse" bidder to be chosen by the middle of November, to set the starting price for the auction. The value of MM&A's physical assets are estimated to be between $50 million and $100 million. Keach, however, was reluctant to speculate on how much they might fetch on the auction block.

"We will found out what these assets are worth when we see what the bids for them are, and when we've completed the auction," Keach says. "There's really no better way to determine that then to see what the market determines."

MM&A has set a soft deadline of the end of month for other potential bidders to express an interest. Independent transportation analyst Anthony Hatch says the rail industry has enjoyed something of a renaissance in recent years, due to efficiency measures, increased investment and other factors.

And he expects there'll be no shortage of interest in what MM&A has to offer - and not just from rail companies. "When a property like this becomes available, especially in a pretty rapid-fire manner like this, I would see - yes - a whole bunch of people expressing interest," Hatch says. "I wouldn't be surprised if there was a private equity firm or some other financial player as well."

One company that's been mentioned as a potential suitor is the Canadian conglomerate JD Irving, based in New Brunswick. A company spokeswoman would not comment on whether Irving has made a formal approach to MM&A, but she says the group's rail unit - NB&M Railways - is keeping its options open.

MM&A meanwhile has requested that $5 million be set aside from the proceeds of any sale to put towards the company's legal fees associated with the insolvency. Trustee Robert Keach is confident that this so-called "carve out," if approved by the judge, will ensure that the legal costs associated with the bankruptcy will not take away from the money available to compensate vicims of the Lac Megantic disaster.

"The victims, specifically the wrongful death victimes and the personal injury victims, enjoy a special priority under U.S. railroad bankruptcy law," Keach says, "And given that priority, we expect that the cost of the case will in no way, shape or form reduce any payouts."

Keach says hundreds of millions of dollars in claims related to the incident have been filed in lawsuits across country and in Canada. Once the Montreal, Maine & Atlantic Railway has sold its assets, Keach says the next major task will be to sort through those claims.



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