Those of us here in Maine figured this was coming in the wake of the Lac Megantic catastrophe. Here's a link to the story on one of our Maine TV stations.
http://www.wcsh6.com/news/article/252438/314/Montreal-Maine--Atlantic-Railways-files-Ch-11
Carl
"I could never belong to any club that would have me as a member."
It really isn't anything to be alarmed over...MM&A will continue to operate but has protected itself and its employees from impending law suits as a result of the LaMagantac disaster and, evidently, other problems.
RIDEWITHMEHENRY is the name for our almost monthly day of riding trains and transit in either the NYCity or Philadelphia areas including all commuter lines, Amtrak, subways, light rail and trolleys, bus and ferries when warranted. No fees, just let us know you want to join the ride and pay your fares. Ask to be on our email list or find us on FB as RIDEWITHMEHENRY (all caps) to get descriptions of each outing.
They played the "Get out of jail free" card.
Norm
So, what does it all mean? Does MM&A not have to pay for damages now? Will they pay some lesser amount? If they are sold, will the buyer assume paying the victims families damages due them?
George
An expect result. The timing is almost perfect as all the costs of this disaster will be included in the bankruptcy filing. MM&A Canada and US may have as well paid some of their critical creditors before filing however recovery of some of those funds will may happen by the bankruptcy court.
MM&A Canada filed bankruptcy as well for their Canadian RR portion . How the Canadian laws work will be the job of other posters. One item of interest is the actual ownership of the RR wreck scene since an American crew was supposed to take the train from its parking site across the border. All in all a bad mess ! !r
I beg to differ with what was said. The receiver (purchaser) is a victim too. They purchased the crude oil, but did not recieve it and will want to be compenssated for its value. They had nothing to do with the wreck, that is the shipper (MM&A).
http://www.boston.com/news/local/maine/2013/08/04/quebec-tragedy-brings-hardship-maine-rail-town/Z6FwdpXpIZc5ve3tFv7mpI/story.html
NW
caldreamer I beg to differ with what was said. The receiver (purchaser) is a victim too. They purchased the crude oil, but did not recieve it and will want to be compenssated for its value. They had nothing to do with the wreck, that is the shipper (MM&A).
With MM&A in bankruptcy, maybe someone else can then purchase that line at a fire sale price. It has the natural advantage of being the shortest rail link to Eastern Canada from central Canada. Perhaps this might fit well into CN's network, or maybe CP can have another look at it and buy it back.
Might also work well for G&W...A long shot: Irving has deep pockets and may be able to purchase the entire line as a way of securing transportation for his products. He already owns the New Brunswick Southern and Eastern Maine Railways... the price might now be right for this multi billionaire to snap up the entire line.
Unfortunately I don't think the MMA will survive this bankruptcy. They have stated that they have between 50-100 million in assets. They already owe between 25-50 million in outstanding debts. The damage estimate from the Lac Megantic disaster are in excess of 200 million. And that is not including lawsuits already filed concerning all of the tragic loss of life. The MMA's east-west line from Maine to Canada is going to be shut down for a long time. Many of MMA's major customers, like Great Northern Paper in Millinocket, are scrambling to find other ways to ship their products now. So, very little revenue is coming into MMA's coffers.
MMA already sold off the old north/south Bangor & Aroostook line in 2010, to the State of Maine. Maine has since leased the line to Irving Transportation, which has been using it regularly. Irving needs an east/west rail line through Maine to transport oil & other goods from Quebec to New Brunswick. I think we will eventually see MMA fold & Irving will take over the lines.
AVRNUT Unfortunately I don't think the MMA will survive this bankruptcy. They have stated that they have between 50-100 million in assets. They already owe between 25-50 million in outstanding debts. The damage estimate from the Lac Megantic disaster are in excess of 200 million. And that is not including lawsuits already filed concerning all of the tragic loss of life. The MMA's east-west line from Maine to Canada is going to be shut down for a long time. Many of MMA's major customers, like Great Northern Paper in Millinocket, are scrambling to find other ways to ship their products now. So, very little revenue is coming into MMA's coffers. MMA already sold off the old north/south Bangor & Aroostook line in 2010, to the State of Maine. Maine has since leased the line to Irving Transportation, which has been using it regularly. Irving needs an east/west rail line through Maine to transport oil & other goods from Quebec to New Brunswick. I think we will eventually see MMA fold & Irving will take over the lines. Carl
OOPS! Forgot to add that it was revealed just the other day that MMA's liability insurance is only 25 million. There's no way they're going to survive this.
Chapter 11
Companies choose to file Chapter 11 because its long-term revenues will be higher than the liquidation value of the assets. This way, creditors can get more money back if they allow the debtor business to reorganize and work out a payment plan. The business becomes a debtor in possession, maintaining control and ownership of their assets and continuing their regular operations. At this point, there is usually no trustee.
A company that declares Chapter 11 must disclose all of its assets and make a list of all the debts that it is seeking protection from. This is the creditors' right to question the debtor, a fundamental part of bankruptcy law. In cases involving millions or billions of dollars, this step alone can be incredibly complex. The creditors also meet with the debtor.
If the bankruptcy court finds that there has been fraud or gross mismanagement on the part of the debtor, they can appoint a trustee, who will take over the operations of the debtor for the duration of the proceeding. The business continues to operate as normal, but the original owner is no longer in control. The trustee appointed to a specific bankruptcy may be different from the "U.S. Trustee." While federal bankruptcy courts are in charge of the proceedings, the Department of Justice also assigns a U.S. Trustee to each district. The U.S. Trustee serves as a watchdog over bankruptcy cases and may act as the trustee in a proceeding.
While under Chapter 11, a company can only make the usual sales and purchases that are part of its standard business operations. For example, it can't buy out another company, sell off a division of the company, or sell a major piece of equipment or property without approval from the court. It can't undergo a major expansion, either.
In all Chapter 11 proceedings, a creditors' committee represents the majority of the unsecured creditors, and negotiates the best possible payment options for them. Large-scale cases may have multiple creditors' committees, each representing different groups and factions of the creditors. Stockholders can also form a committee.
The debtor can also "avoid" certain payments or purchases that happened in the period prior to the bankruptcy. The usual period is 90 days, but payments or gifts made to friends, family or company insiders have a one-year limit (or longer, depending on the state where the bankruptcy is filed). Some payments can be returned to the debtor and become subject to the terms of the reorganization plan. This keeps debtors from manipulating their assets and giving preference to certain creditors.
Once the debtor submits a reorganization plan, the creditors and the company's stockholders vote on it. Stockholders are generally very low in terms of priority, and even if they vote down the plan, the court can go ahead with it if the creditors approve. Once the court approves the plan, the Chapter 11 bankruptcy is certified and confirmed. Now the debtor must comply with the plan and make the proper payments to the creditors (or to the trustee, if one has been appointed).
It is important to note that during the period of reorganization, the company's stocks will be virtually worthless. If the company gets out of Chapter 11 and begins operating normally, those stocks can increase in value, but at first they will probably be worth much less than the initial purchase price. Bondholders can sometimes get a fraction of the bonds' face value as part of the reorganization.
If a debtor violates the terms of the plan, there are several potential consequences. A trustee may be appointed. If it appears that the company will not be able to operate profitably and follow through with repayment plans, the Chapter 11 will be converted into Chapter 7. This is a death sentence for the company.
At this point, the debtor formulates a plan to reorganize its debts. This plan can be a simple as a payment plan. With larger bankruptcies, companies may take many steps to reorganize their debt. They might offer stock to some creditors. A retail business might have to close stores, lay off employees, or renegotiate union contracts. One of the major provisions of Chapter 11 allows a company to void many of its contracts, including union contracts, contracts with suppliers, and real estate leases.
C&NW, CA&E, MILW, CGW and IC fan
SCHLIMM:
I think we all understand what Chapter 11 entails. However, we have a set of circumstances here that all but insure that MMA will not survive it. There was a breakdown of their current debt to creditors on our local news here the other day. I forget the exact breakdown, but one debt alone was over 20 million. There were several others, a few million here, a few million there, so their current debt is somewhere between 25-50 million. The current estimate of physical damage alone in the Lac Megantic disaster (that's JUST physical damage.......buildings & infratructure of the town) is over $200 million. That does NOT include the damage (which is essentially total) to the MMA rail lines & infrastructure that was destroyed & will need to be rebuilt. It also does not include damages for loss of life & loss of income for all the businesses destroyed. Some of those lawsuits have already been filed & more are sure to come.
MMA main east/west line through Maine is in-operable & totally shut down. It will be for a long time to come. So, they have no revenue coming in. There's no way you can work out a payment plan for your creditors, no matter how equitable, if you have no income coming in. The MMA has only between 50-100 million in assets. Their liability insurance only covers 25 million. When all is said & done, they could be looking at 500 million (half a billion) or more in liability. The numbers just don't jive. There's no way they're going to survive this.
The Rock Island and the Milwaukee Road didn't survive bankruptcy, but a large amount of trackage that they operated when they entered bankruptcy is still operated.
schlimm Chapter 11 [snipped - PDN] . . . If it appears that the company will not be able to operate profitably and follow through with repayment plans, the Chapter 11 will be converted into Chapter 7. This is a death sentence for the company. . . .
One supplement/ clarification to the quoted sentences (above): Chapter 7 is usually liquidation of the business, as in winding up its affairs and settling up its accounts, selling everything off, and distributing whatever the proceeds are to the creditors in accordance to their priority and the approved plan (if any). However, sometimes that is accomplished not via such an "asset acquisition" process. Instead, the liquidation can take another route, such as a forced sale of all of the stock to another entity (for example, to preserve the corporate shell and any special rights that are in or attached to its name alone), or a merger into another business, etc.
Another difference - to expand on another post above - is that even if the corporate entity goes out of business, the tracks and routes as physical assets can remain in place, and then be operated by the purchaser. Thus, a Chapter 7 liquidation does not necessarily mean that the tracks will be ripped up - only that the former owner railroad ceases to be and do business. The new acquiring business can then run a railroad operation - be a "train company", as is sometimes said - on those same tracks, unless a decision has been made to abandon and salvage them. Finally, in any of these events, approval / concurrence by the U.S. Surface Transportation Board is usually required before a sale, acquisition, abandonment, etc.
Thanks again.
- Paul North.
The Rock Island didn't survive as an operating railroad, but the corporation survived bankruptcy.
The MM&A took bankruptcy to protect it's assets. Any judgments against it could be reduced to pennies on the dollar. It may not be "right" in the way most people look at things, but it is legal. Johns Manville did the same thing many years ago when claims against it because of asbestos threatened the company. Bankruptcy can be a tool for companies to protect themselves, they don't necessarily have to be down and out and completely cashless.
Now, I would not be surprised if the MM&A does not survive as an operating company. Given what seems like their existence hanging by a thread even without this tragedy, I could see them folding. I think it will be less so because of any damages they might owe and more to the fact they may lose customers or potential customers to the bad PR. Long term creditors and/or suppliers may not want to stand behind them, either.
One question about them saying they will no longer handle crude oil. How can they do that as a common carrier? I could understand the FRA ordering them to not handle haz-mat because of track conditions. I could even see them voluntarily embargoing themselves, but I would think that it would have to be for all haz-mat, not just oil.
Jeff
jeffhergert The Rock Island didn't survive as an operating railroad, but the corporation survived bankruptcy. The MM&A took bankruptcy to protect it's assets. Any judgments against it could be reduced to pennies on the dollar. It may not be "right" in the way most people look at things, but it is legal. Johns Manville did the same thing many years ago when claims against it because of asbestos threatened the company. Bankruptcy can be a tool for companies to protect themselves, they don't necessarily have to be down and out and completely cashless. Now, I would not be surprised if the MM&A does not survive as an operating company. Given what seems like their existence hanging by a thread even without this tragedy, I could see them folding. I think it will be less so because of any damages they might owe and more to the fact they may lose customers or potential customers to the bad PR. Long term creditors and/or suppliers may not want to stand behind them, either. One question about them saying they will no longer handle crude oil. How can they do that as a common carrier? I could understand the FRA ordering them to not handle haz-mat because of track conditions. I could even see them voluntarily embargoing themselves, but I would think that it would have to be for all haz-mat, not just oil. Jeff
You have put this situation in good perspective. Thank you!!
The challenges for MM&A are significant.
Charlie
Chilliwack, BC
Why is everyone assuming this whole thing is the MMA's fault? FRA reports take months to come out. I am not entirely sold it was the engineers fault.
Mechanical Department "No no that's fine shove that 20 pound set all around the yard... those shoes aren't hell and a half to change..."
The Missabe Road: Safety First
.
Bucyrus coborn35 Why is everyone assuming this whole thing is the MMA's fault? FRA reports take months to come out. I am not entirely sold it was the engineers fault. I am not convinced that it was the engineer's fault. Depending on what his supervisors may have told him regarding the setting of handbrakes, it could be his supervisor's fault. The CEO Ed Burkhardt said he did not know what the company rules call for in the setting handbrakes on that grade. The company does not make those rules public either. It is Burkhardt who is blaming the engineer for not setting enough brakes.
coborn35 Why is everyone assuming this whole thing is the MMA's fault? FRA reports take months to come out. I am not entirely sold it was the engineers fault.
I am not convinced that it was the engineer's fault. Depending on what his supervisors may have told him regarding the setting of handbrakes, it could be his supervisor's fault. The CEO Ed Burkhardt said he did not know what the company rules call for in the setting handbrakes on that grade. The company does not make those rules public either. It is Burkhardt who is blaming the engineer for not setting enough brakes.
The engineer's fault? The supervisor's fault? Fault in the lack of clarity in the rules for setting the handbrakes? One can have a field day pointing the finger at potential fault. But the bottom line is the buck stops at the corporate offices. No matter at whom the finger of fault is pointed, in the end MMA is ultimately responsible and liable.
Yes, the line will be eventually repaired & re-opened. It's a vital one here in Maine. Many manufacturers & suppliers of fuel, wood and paper products in Quebec, Maine and New Brunswick depend on it to ship their goods. Someone will end up operating the line, but I just don't think it will be MMA.
AVRNUT Yes, the line will be eventually repaired & re-opened. It's a vital one here in Maine. Many manufacturers & suppliers of fuel, wood and paper products in Quebec, Maine and New Brunswick depend on it to ship their goods. Someone will end up operating the line, but I just don't think it will be MMA. Carl
AVRNUTThe engineer's fault? The supervisor's fault? Fault in the lack of clarity in the rules for setting the handbrakes? One can have a field day pointing the finger at potential fault. But the bottom line is the buck stops at the corporate offices. No matter at whom the finger of fault is pointed, in the end MMA is ultimately responsible and liable. Yes, the line will be eventually repaired & re-opened. It's a vital one here in Maine. Many manufacturers & suppliers of fuel, wood and paper products in Quebec, Maine and New Brunswick depend on it to ship their goods. Someone will end up operating the line, but I just don't think it will be MMA. Carl
Carl,
I was responding to the comment by coburn35 regarding the disctinction between fault of the engineer versus fault of the MM&A. But I will remove my comment since it is not about liability as it pertains to the filing of bankruptcy. I have some other ideas related to my comment, so I will mention them in a new thead.
But regarding the ultimate liability that you mention, is it certain that it will fall ultimately and exclusively on the MM&A? Why wouldn't the oil industry that shipped the crude on the MM&A train be liable if it is found that the product they shipped contributed to the disaster?
Bucyrus AVRNUTThe engineer's fault? The supervisor's fault? Fault in the lack of clarity in the rules for setting the handbrakes? One can have a field day pointing the finger at potential fault. But the bottom line is the buck stops at the corporate offices. No matter at whom the finger of fault is pointed, in the end MMA is ultimately responsible and liable. Yes, the line will be eventually repaired & re-opened. It's a vital one here in Maine. Many manufacturers & suppliers of fuel, wood and paper products in Quebec, Maine and New Brunswick depend on it to ship their goods. Someone will end up operating the line, but I just don't think it will be MMA. Carl Carl, I was responding to the comment by coburn35 regarding the disctinction between fault of the engineer versus fault of the MM&A. But I will remove my comment since it is not about liability as it pertains to the filing of bankruptcy. I have some other ideas related to my comment, so I will mention them in a new thead. But regarding the ultimate liability that you mention, is it certain that it will fall ultimately and exclusively on the MM&A? Why wouldn't the oil industry that shipped the crude on the MM&A train be liable if it is found that the product they shipped contributed to the disaster?
To my way of thinking it's the same as if a tanker truck carrying oil crashed on a highway at an underpass & exploded, destroying the underpass, several other vehicles & resulting in loss of life. Is the company that produced the oil liable & responsible? No. Regardless of wether the accident was caused by driver carelessness, mechanical malfunction on the truck or whatever, the bottom line is that the trucking company transporting the oil is ultimately responsible & liable. It's the same here with the Lac Megantic disaster. MMA contracted to transport the oil. It's their railroad. If it was human error, equipment failure, a fault in the track, the bottom line is that they are ultimately accountable for it. It's MMA's employee, MMA's equipment, MMA's track etc. When you contract to deliver a product you are agreeing to the responsibility for the safe transport of that product. Any issues that occur during that transport are equally your responsibility. Just MHO.
AVRNUT To my way of thinking it's the same as if a tanker truck carrying oil crashed on a highway at an underpass & exploded, destroying the underpass, several other vehicles & resulting in loss of life. Is the company that produced the oil liable & responsible? No. Regardless of wether the accident was caused by driver carelessness, mechanical malfunction on the truck or whatever, the bottom line is that the trucking company transporting the oil is ultimately responsible & liable. It's the same here with the Lac Megantic disaster. MMA contracted to transport the oil. It's their railroad. If it was human error, equipment failure, a fault in the track, the bottom line is that they are ultimately accountable for it. It's MMA's employee, MMA's equipment, MMA's track etc. When you contract to deliver a product you are agreeing to the responsibility for the safe transport of that product. Any issues that occur during that transport are equally your responsibility. Just MHO. Carl
I understand your analogy, but in this case, the federal authorities are suggesting that crude oil itself may have contributed to the Lac-Megantic disaster in the following ways:
1) The product may have corroded the tank cars and consequently weakened them to the point where they broke apart more easily in the derailment.
2) The product may have been abnormally volatile and flammable, which increased the damage caused by the explosion and fire.
If these factors are true, I would think that the liability would extend to include the ones who produced and loaded the crude oil.
The Bankruptcy filing ensures that the rights of all creditors will be considered not just those of the first creditor to get a court judgement against the company. The secured creditors could put the company into involuntary bankruptcy at any time after the filing of the Class Action suit by the victims, as long as the claimed amount exceeded the likely value of the railway company.
"I understand your analogy, but in this case, the federal authorities are suggesting that crude oil itself may have contributed to the Lac-Megantic disaster in the following ways:
If these factors are true, I would think that the liability would extend to include the ones who produced and loaded the crude oil."
That's really all "after the fact". All that could be true, but it did not cause the accident. All that is a result OF the accident. The explosion & fire came about BECAUSE of the accident. Here again, it comes down to the real bottom line:
The real accident was triggered by the fact that an un-attended train was left improperly secured on a graded siding & it started to move as a result. That's where the accident began & where the ultimate responsibility lies. And that responsibility is MMA's. Once it started moving down that grade on it's own there was no way to stop it. Everything that happened after that is really a result OF the accident. Cause and effect, I guess you could say. The derailment & explosion was the effect. The un-attended, improperly secured train was the cause.
Our community is FREE to join. To participate you must either login or register for an account.