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Maine-Based Railway Sold to Investment Group Subsidiary
01/21/2014   Reported By: Keith Shortall

The bankrupt Maine railroad company at the center of a catastrophic explosion and fire that killed 47 in Lac Megantic, Quebec this July has a new owner, according to the editor of a railroad trade newsletter. The Montreal, Maine and Atlantic Railway has been auctioned to Fortress Investment Group for an undisclosed amount. And as Keith Shortall reports, analysts say Fortress brings a strong track record to a long-struggling rail line.

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Atlantic Northeast Rails and Ports' Editor Chop Hardenbergh says the bankruptcy auction was held at a Portland law firm, and closed to the news media. There had been a so-called "stalking horse" bid of more than $14 million established at the outset of the process, but Hardenbergh says it's unclear what the railway actually went for.

"I can't tell you how much it was for, I can only tell you that the subsidiary of Fortress America, which put in what was called the 'stalking horse' bid, did win," Hardenbergh says.

The source of that information, Hardenbergh says, was an executive of the winning bidder. That company, a subsidiary of New York based Fortress Investment Group, is Railroad Acquisition Corporation, which had submitted a stalking horse bid of over $14 million dollars at the outset of the process.

And Hardenbergh says Fortress has a strong record of managing rail lines in the region.

"Well, they owned Rail America, which was a large railroad holding company up until last year, which as part of its holdings, owned railroads in New England and in the Maritimes, and in Quebec," Hardenbergh says. "So they knew the region, and they knew railroading quite well."

Independent rail analyst Tony Hatch says he believes that Fortress Investment Group is well-equipped to take control of the troubled MMA, and move beyond the tragedy that forced the railroad into bankrupcty about a month after the accident.

'Hopefully they can create a culture of safety there, as well as one of service, and create a successful model that will look past their recent tragedy and help develop rail in the area, in the way that it should be developed," Hatch says.

But Chop Hardenbergh says no matter how good the management, it's unclear to him what Fortress sees as the value of the MMA.

"I am not sure, frankly, what the appeal is," he says. "As we know, not only did this line go through this bankruptcy, it went through another bankruptcy 10 years before that. And 10 years before that, back in 1994, it was sold by Canadian Pacific because it wasn't doing very well. I would hazard a guess that Fortress is going to try to recapture the oil - the crude oil - that was moving through Quebec to St. John (New Brunswick). And they also see other potential business, which is not, at this point, visible to me, anyway."

Trustee Robert Keach did not return calls by air time, but has said that roughly 20 potential buyers had emerged. Nate Moulton, who directs the rail program at the Maine Department of Transportation and was also present at the auction Tuesday, declined comment.


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