fogg1703 wrote: I concur with the general consensus that bankruptcy is likely, however this is a great opportunity for CP to regain the Moosehead at a possible bargain price.
Gilbert B Norman wrote: Now there is the possibility that CP may give the MM&A properties a second look - costs of rebuilding to at least Class III notwithstanding. When the decision to bail out was made, North American crude was simply in its infancy (geologists have known it was there for at least 100 years; I knew it since taking Geo 101 during 1962. At even $60bbl it just was not economical to extract). At one time the Irving Oil refinery was receiving shipments by ocean carriers from the Middle East - now the tide has turned and they are exporting refined Canadian oil from there.
It seems to me any decision to buy the RR, (or make any investment for that matter), will depend on the return that could be generated over the out years. I've seen estimates for rebuilding RRs that work out to $1M a mile. That is for reactivating abandoned lines to Class III status. Since the MMA isnt starting from scratch costs will not be that high and the new buyer might not bother to go to Class III but there will still be some sort of investment required to upgrade the line. Authorities will not approve the sale or takeover just to maintain the status quo. So, even if the investment is half that amount, or let's say a quarter, that's still $250K a mile.
According to the MMA website, the network is 510 miles. That works out to a boatload of money. Even if you assume the RR could be bought for nothing out of the court system after a bankruptcy, and if you pare back the number of miles that will be upgraded to the main line that runs Montreal to Brownville Junction, perhaps even reduce the $ per mile further to $150K, you are still looking at an investment that could hit nine figures. Do the returns on the current business level justify that level of investment? Does the future oil hauling business opportunity really look that large?
Will Irving be willing to guarantee a certain level of business? Buying the RR for themselves is an option that's been discussed on this thread but it seems to me that would involve a strategic shift in their current business into another field. I wonder if they are really willing/anxious to do that. The few miles of track they have now does not compare to the responsibilities they will face if they buy a regional RR.
My take on the future of the line is MMA doesn't survive, and the line defaults to the government. I do not see any investor coming in and making the investment that will be required. I would love to be proved wrong but I think things are looking very bleak.