CENTRAL MAINE & QUEBEC RAILWAY (CMQ) — New Owner of MMA

[Gilbert B Norman]

Well, Mr. Ridgefield, I guarantee you I don't have any B's, or let alone C's, in my portfolio. Maybe within a high income fund I have, but no way held outright.

I hear the junkman's bells a ringing.

While you as a financial professional know that a bankruptcy judge, absent some kind of too big to fail enterprise, must first think of the creditor's interest, but if the intent is have MM&A remain an operating business entity, it might be advisable to 'look around'.

Finally, here is a page of interest. Possibly something can be gleaned from the 10-K's FEC Holdings is required to file.

http://fecrwy.investorroom.com/annual-reports" onclick="window.open(this.href);return false;

[CN9634]

I'll some quick ratios in a bit but nothing looks out of the ordinary at first glance.

[rootsblown]

Wondering if LLC will be replacing the existing MMA management staff with some of their own people?? I wouldn't think they would dare not to. It appears that MMA is still struggling on running {in a efficient and organized way} what little traffic they are moving now.

[CN9634]

I still think the 'Western Gateway' has merit. Also, the Canadian operations have a number of customers. You just have a 117 mile bridge line between the two halves which constitutes almost a quarter of all the track miles on the RR. Revenue per mile should be a ratio looked at (I really wish I had the MMA financial statements... we could do some interesting things) and obviously increased. I think that if Fortress can create a competitive option for CN, NBS may shift some traffic. But the problem is that the more carriers you put into the equation, the harder it is to do this. However, if they can syphon traffic off the MNR, grow interchange with NBS, maintain traditional PAR interchange, and grow traffic to Searsport, then Maine can become an anchor for the bridge. First thing to do will be to reclaim lost non-oil traffic...

[Gilbert B Norman]

Gents, if I may and as a Past Moderator arounds these parts (Amtrak Forum), I wish to commend all for the maturity and respect with which this topic has moved forth. No youngsters, such as found at the various passenger train train forums, seem to be around here with the likes of 'Gee, they should bring back the 'Atlantic Limited' and the 'Aroostook Flyer'.

There is now a responsible party that has made a bid for the MM&A property, and presumably they have done so with the intent of restoring operations - and hopefully without third hand motive power, and 'cutting every corner there is to cut' endemic to MM&A operation of the property.

A review of the FECH SEC filings will prove relevant to this topic as they will possibly give a more updated picture of a Fortress Investment Group railroad's financial position - and of course a reflection as to how that property is operated. I researched the FEC 2010 FEC Annual Report during 2012 when this All Aboard Florida passenger train initiative was first proposed. If FEC's financial condition has improved to the extent that railroad operations are now providing adequate cash flow for the debt service arising from the LBO, then 'GREAT' -even I remain at a loss as to 'what are they up to' with this passenger train initiative.

Sorry, but I still hold that the All Aboard Florida initiative will never turn a wheel for a private-sector account.

[F-line to Dudley via Park]

They fully intend to operate the railroad. From the sounds of it, VRS got the Newport sub as well. Too bad the joint PAR/EMRY bid did not get approved but they only tried to get the Maine lot...

Is there any news confirmation that VRS picked up those track miles? I know their spokespeople seemed to be considerably more excited than the other RR's in their statements, but didn't see any explicit details in the reports about the Newport sub either being partitioned to them as part of the sale or IOU'd by Fortress to them to operate.

[CN9634]

No there is none yet, but it is a reasonable assumption. I could be completely wrong but it makes little difference with that line.

[Fritz]

Hello,
VRS - through its WACR subsidiary - did make a bid for the Newport line (I think the amount was $750k but that could be off), but they were unsuccessful. Likewise, Irving Group - through its EMR subsidiary - and Pan Am bid on the Maine lines, but they were also unsuccessful. No other bids were submitted prior to or during the auction. In the end, the trustee - and now the courts - selected the one and only bid for the entire railroad by Fortress Investment Group. Here's a link to an article regarding the courts' approvals of the sale:

http://www.kjonline.com/news/Two_courts ... lroad.html" onclick="window.open(this.href);return false;

Best,
Fritz

[Ridgefielder]

A review of the FECH SEC filings will prove relevant to this topic as they will possibly give a more updated picture of a Fortress Investment Group railroad's financial position - and of course a reflection as to how that property is operated. I researched the FEC 2010 FEC Annual Report during 2012 when this All Aboard Florida passenger train initiative was first proposed. If FEC's financial condition has improved to the extent that railroad operations are now providing adequate cash flow for the debt service arising from the LBO, then 'GREAT' -even I remain at a loss as to 'what are they up to' with this passenger train initiative.

Mr. Norman: Given that the real estate crash slammed South Florida particularly hard, and given that 2010 was still a recession year, I'm sure the FEC's numbers looked wretched.

Using the Q you linked to, I crunched some more current numbers on the FEC. Back-of-the-envelope (annualizing the trailing-9-mos numbers in the October 10Q) looks like they generated $96mm in EBIDTA on $270mm in revenue. EBIT was $69mm, annualized debt service was approximately $59mm, so net pre-tax income works out to about $10mm. Those numbers would give you Debt/EBITDA ratio of 6.6x. Also looks like their operating ratio was about 74.

Tough to compare the FEC to any of the publicly-traded roads out there because it's such an odd animal- basically one 350-mile long heavy-duty mainline with no branches that operates like a Class I. The smallest Class I-- KCS-- has annual revenues 9x those of the FEC. But it looks like they in turn are doing 10x the revenue of the P&W. Bottom line though is that they appear to be covering debt service with room to spare.

Also, at least extrapolating from the FEC, it looks like Fortress does know "a way to run a railroad."

[gokeefe]

Tough to compare the FEC to any of the publicly-traded roads out there because it's such an odd animal- basically one 350-mile long heavy-duty mainline with no branches that operates like a Class I.

Excluding the part about operating like a Class I that sounds familiar. But of course the Moosehead does not have nor will it ever have the traffic volumes of the FEC.

[Ridgefielder]

Article from this morning's WSJ made me think of the Moosehead:

Safety Board Calls for Tougher Standards for Shipping Crude Oil by Rail: NTSB Asks for Expanded Rail Routes to Avoid Populated Areas
Federal safety investigators called on railroads to route oil-filled trains around heavily populated areas as part of a series of recommendations to reduce risks from the growing business of shipping crude by rail.

http://online.wsj.com/news/articles/SB1 ... _US_News_5

For better or worse, the line sure doesn't traverse many "heavily populated areas."

[mtuandrew]

Tough to compare the FEC to any of the publicly-traded roads out there because it's such an odd animal- basically one 350-mile long heavy-duty mainline with no branches that operates like a Class I.

Excluding the part about operating like a Class I that sounds familiar. But of course the Moosehead does not have nor will it ever have the traffic volumes of the FEC.

Not unless every last barrel of oil shipped over the CP (and a few from the CN as well) goes to Saint John. Hope Fortress has the money to invest in a full rehabilitation of the Moosehead if they are banking on oil, and is willing to get out in front of its competitors in using safer tankers.

Otherwise, I wonder whether this follows Mr. Norman's thoughts - "we got it at a bargain, so we'll use it up and sell the husk to the state of Maine."

[Dick H]

General question. Are there substantial buildings and land parcels no longer used,
that will likely be on the selling block or have the owners since the BAR went out
already sold most of them off? Supposedly Guilford recouped most, if not all, of
their purchase price for the B&M in selling off property, which continues today,
although few major properties without haz-mat issues still remain.

[Cowford]

"...and is willing to get out in front of its competitors in using safer tankers."

That will not be their call, at least directly. That's Transport Canada, FRA, AAR and RAC's call.

"Otherwise, I wonder whether this follows Mr. Norman's thoughts - "we got it at a bargain, so we'll use it up and sell the husk to the state of Maine." "

Dismemberment is a possible strategy; it's almost certainly a Fortress contingency strategy.

[mtuandrew]

Cowford: indeed. Maine has made it clear that they won't accept abandonment, so they are the buyer of last resort. FIG has to figure that they can squeeze a bit of money from that stone if necessary. As for the tankers, obviously TC, the FRA, et al will create the new standards, but the new MM&A (CDAC, BAR, whichever) can proactively set internal interchange standards and invest in tankers that meet the updated regulations. I also suspect that this Fortress operation will have a better PR wing than RailWorld, though that doesn't seem too hard at this point

I'd be interested to see if Fortress attempts to purchase some or all of the NBSR, Maine Northern, and EMRY. Seems like it would make sense to keep the rate division to a minimum, eliminate competition, force PAR to interchange with them, and tap into whatever business is keeping the Irving Lines afloat in Maine and New Brunswick.