What's next for MMA?

FRA loan was a track loan in 2005. I think they used some of it for the upgrade of the millinocket sub and moosehead subs.

Sent from my iPhone.

JimBoylan wrote:

Gilbert B Norman wrote:from a review of the M M & A Bankruptcy Petition, there is no reference to secured creditors within such. As a result, I'm at a loss to know the Portland paper's source for their report that the US Government is the largest secured creditor.

It's from this link, asking to spend some of Wheeling & Lake Erie's Accounts Receivable collateral and replace it with new collateral.
http://media.kjonline.com/documents/Motion+by+MMA.pdf
Also, the $785,985.88 claim owed to Mr. Burkhart is really owed to Rail World, Inc., and his name is part of the mailing address of the "employee ... familiar with the claim who may be contacted". Do newspapers ever read every word of their source documents?

Thank you, Mr. Boylan, for locating another link that addresses my concerns. For reader's convenience, your posting is quoted in its entirety here as it appears on the preceeding page.

It would appear that the Wheeling and Lake Erie RR, owned by a group of private investors, is prepared to play banker and provide what normally is known as Debtor in Possession (DIP) loans, even though they are idsentified by another term.

gokeefe wrote:I am mildly surprised after all this that they are filing Chapter 11 (reorganization) and not Chapter 7 (liquidation). However, for a railroad this may be the normal course of action in order to allow for a more orderly transition to a new owner.

It's standard operating procedure to go Chapter 11 to cover all bases. Chapter 11 can become Chapter 7 if there is no path out of it with a court-supervised reorganization and no potential buyers, but it is very rare to go Chapter 7 with an initial filing. 11 can potentially recoup more money by keeping the illusion of a company still intact and still wanting to be competitive. While MMA was hardly robust beforehand, it positions them far better to go 11 and put forth the face "Well, we were viable until **** happened that awful night in Quebec"...rather than raise the white flag immediately and admit they were never solvent to begin with. They have to drive their acquisition price up as much as possible or stop-loss it from falling as much as possible to recoup money for their creditors.

And, as stated previously, railroads are not allowed to go the Chapter 7 route... so apparently that was never an option for MMA.

"There have been some wimpers from at least one shipper"

Thanks 407. Didn't know they had a shipper in Jackman. Wonder if it's boxcar or centerbeam business. Either way, I'm surprised they haven't gone the transload route, working with NEPW or Safe Handling on SLR or a company in Portland on PAR.

News from Québec Superior Court:

The Portland Press Herald wrote:That court ruled that it would accept bankruptcy protection for the company in order to “prevent anarchy,” Justice Martin Castonguay told the Montreal courtroom, according to CBC News.

Castonguay said he was not impressed with the railway's application for bankruptcy protection and the way MM&A has conducted business since the disaster but, in light of the circumstances, there was no alternative but to grant the application.

The railway's insurance company also received a stay of proceedings, which means that the class-action lawsuits already filed cannot go forward for the time being, according to CBC News.

Read more at: http://www.pressherald.com/news/Montrea ... ction.html" onclick="window.open(this.href);return false;

Also from the above link:

The railroad faces several lawsuits and estimates that its cleanup costs will surpass $200 million.
Court documents show that the company’s liability insurance policy covers only $25 million for property damage, bodily injury, fire suppression and environmental cleanup.

Interesting that they are covered for "environmental cleanup". Tyburn Railroad had to pay extra to remove insurance policy exclusions of pollution and contamination!

JimBoylan wrote:Also from the above link:

The railroad faces several lawsuits and estimates that its cleanup costs will surpass $200 million.
Court documents show that the company’s liability insurance policy covers only $25 million for property damage, bodily injury, fire suppression and environmental cleanup.

Interesting that they are covered for "environmental cleanup". Tyburn Railroad had to pay extra to remove insurance policy exclusions of pollution and contamination!

Given the nature of their business, it sure seems to me like the MM&A was underinsured.

Mr. Ridgefield, I think that is a 'hit the nail on the head' remark you immediately made.

Obviously MM&A/MM&AC was woefully underinsured to handle their 'petro-bonanza'. One has to wonder if their policy limits, and by succession, their premiums, reflected the volume of HAZMAT they were handling.

Historically, it would appear from discussions here and at the related topic, MM&A and predecessors handled 'Products of Forests' and 'Products of Agriculture' (Maine potatoes). That is not to say HAZMAT was ever handled or the road was prohibited from doing so, but it does say that HAZMAT was a small portion of their ladings prior to the 'bonanza' .

If the runaway was laden with paperboard and/or potatoes, all there would have been was a 'nice mess' to clean up in town with few if any injuries to persons.

Finally, if MM&A was deliberately, or by oversight, underinsured, one must wonder if under Canadian law, such condition, especially if deliberate, could rise to the level of 'gross negligence' and as a result some party could be looking at criminal charges.

I do remember some "hand wringing" from the American Short Line & Regional Railroad Association about 4 years ago when there was a proposal that railroads that hauled Inhalation Hazard chemicals carry at least $10,000,000 of insurance. Where would we find an insurance company big enough to write policies that large for all of the more than 500 railroads in the country?
Even 12 years ago, the Kansas City Southern mentioned in their Annual Reports that they had only $10,000,000 of liability coverage including a $3,000,000 deductible for an approximately $14,200,000 grade crossing case in 1998 in Oretta, La. However, for a 1995 explosion in Bogalusa, La. of $22,3000,000, they collected all but $3,000,000 from insurance companies.

Gilbert B Norman wrote:Obviously MM&A/MM&AC was woefully underinsured to handle their 'petro-bonanza'. One has to wonder if their policy limits, and by succession, their premiums, reflected the volume of HAZMAT they were handling.
...

Finally, if MM&A was deliberately, or by oversight, underinsured, one must wonder if under Canadian law, such condition, especially if deliberate, could rise to the level of 'gross negligence' and as a result some party could be looking at criminal charges.

Or a further thought-- did they only carry $25 million in liability insurance because their primary insurance carrier, after reviewing the state of the property, etc., identify risks that caused them to refuse to underwrite a larger policy? Will be interesting to see who the insurer was.

JimBoylan wrote:I do remember some "hand wringing" from the American Short Line & Regional Railroad Association about 4 years ago when there was a proposal that railroads that hauled Inhalation Hazard chemicals carry at least $10,000,000 of insurance. Where would we find an insurance company big enough to write policies that large for all of the more than 500 railroads in the country?

Is that really that much? 500 x $10,000,000 is $5 billion. Traveler's alone has well north of $50 billion in outstanding property & casualty policies. Presumably every single railroad wouldn't go to the same insurer.

Thing is, with insurance, it seems to me that it's not necessarily the coverage itself but the cost at which that coverage comes that's the governing factor. And seeing as Burkhardt has the reputation of a cost-cutter I could certainly a company run by him skating right down the edge (and maybe falling over it?) in terms of liability coverage.

JimBoylan wrote:I do remember some "hand wringing" from the American Short Line & Regional Railroad Association about 4 years ago when there was a proposal that railroads that hauled Inhalation Hazard chemicals carry at least $10,000,000 of insurance. Where would we find an insurance company big enough to write policies that large for all of the more than 500 railroads in the country?

$10,000,000 is actually a very low face coverage amount for liability, especially when you're talking about a railroad corporation.

As you mention its barely enough, or not enough at all to cover a significant grade crossing accident. I believe Mr. Norman has alluded to the use of the international insurance and reinsurance market, mostly out of London (Lloyd's) who are the same people that right coverage amounts for the maritime industry in the hundreds of millions.

Also as discussed the reinsurance policies typically don't kick in until and out of pocket deductible has been met (often in the tens of millions). MMA does not appear to have had such coverage and also appears to have had little if any primary liability insurance. As usual of course coverage would not apply in the event that there was a determination of a criminal act.

Regardless there are plenty of companies in the U.S. that could write liability policies for coverage in the tens or even hundreds of millions for a single corporation without too much difficulty.

I spoke with a friend about an Irving system that controlled the entire line. The benefits seem quite clear. Getting to Montreal disrupts some of the dominance CN has over Saint John. You could see tropical and MSC intermodal traffic switch back to CP as well as occasional unit potash trains. It had been discussed in years past about units trains to Searsport which may be a possibility with a stronger line. The biggest factor you could see would be a shift from Mattawamkeag interchange with PAR to an interchange at NMJ. I mean lets face it, NMJ has greater capacity for interchange. But in the discussion the greatest challenge for a larger NMJ interchange was oil trains. Irving would have to rebuild the interchange track over the loop but it is doable. Also, the 6-axle ban east of Waterworks could easily be avoided and you could see the return of full unit trains with foreign power. It would be interesting to see the oil train overtake itself off the MEC main and onto the old B&A main. Once again, all this is speculation but a unified Irving line would have great potential. You could also see growth to Searsport with export traffic from Saint John. This would simply increase capacity that is sorely needed at the port of Saint John. One other thing is you may see the line from Old Town to Keag (Or best case scenario, Lincoln) abandoned on the MEC side. A stronger interchange at NMJ would prompt such a bridge line unneeded. Better track from Brownville to NMJ is a key strength and Irving would get a greater haul. Even if Pan Am ran up to Brownville, they could replace the bridge line from Old Town to Keag.


Food for thought, but I think a combined Irving system to Montreal yields great potential for rate wars with CN/CP. Also, connections with VRS/NECR/CSX could play rate wars with Guilford. It should be interesting to see what happens next.

Agreed on all fronts CN9634. Even if the state were to somehow get involved, Irving's willingness to expand ops at Searsport and their already good working relationship with Maine has them as a clear favorite. When the Irving/CN deal expires look for the Moosehead to be self sufficient with at least 2 trains each way daily, without the oil trains returning. They are handing over one train daily now to CN and then running a 2-3 day/week SJPO with PAR. I could see that pushed to daily if the can have a next day- day 1/2 handoff to CSX via CP in Montreal for eastern seaboard delivery. If I were PAR I would be worried.

If Irving purchased the MM&A, would there be any incentive in getting more interchange down the old Conn River line through the Newport-Lyndonville-Wells River-WRJ route via VTR to the NECR?