The assets of the railway whose train derailed in Lac-Mégantic, Que., last summer will be sold to a New York-based investment company.
Fortress Investment Group LLC won an auction for Montreal Maine & Atlantic Railway this week, according to the trustee responsible for MM&A’s sale. The railway had applied for creditor protection in Canada and the United States last year, after one of its trains carrying crude oil jumped the tracks and exploded in downtown Lac-Mégantic, killing 47 people.
Fortress did not respond to requests for comment about Tuesday’s auction. It will be up to the company to determine how it wants to use the rail line that runs through Lac-Mégantic in the future, including whether crude will once again be moved through the small Quebec community by rail.
A court is expected to confirm on Thursday that Fortress will take over most of MM&A’s assets and announce the final price the company will pay. The minimum bid was set at $15.7-million.
Luc Despins, a member of the legal team representing the municipality of Lac-Mégantic, the Quebec government and victims of the derailment in MM&A’s Chapter 11 bankruptcy proceedings in the United States, said he had hoped for a better price.
“But the current environment involving trains and various train wrecks is not really conducive to obtaining a much higher price,” Mr. Despins said in an interview.
Court documents filed in the United States and Canada suggest that the environmental cleanup of Lac-Mégantic could cost more than $200-million, and the company is also facing lawsuits from those affected by the crash. With third-party liability insurance of just $25-million at the time of the accident, the court filings made it clear that MM&A had neither the money nor the insurance to cover those costs.
The railway’s secured debt includes $27.5-million owed to the U.S. government, out of a $34-million loan it received in 2005. MM&A also owes $6-million on a line of credit provided by Ohio-based Wheeling & Lake Erie Railway Company and has hundreds of unsecured creditors.
A statement from Wayne Power, vice-president of J.D. Irving’s transportation and logistics division, said his company had unsuccessfully bid on the Maine portion of MM&A’s track but lost to Fortress.
“In the end, the trustee went forward with a single buyer of the entire MMA railway line (Maine, Quebec, and Vermont track),” Mr. Power wrote. “We look forward to working with Fortress Investment Group of New York as they assume operation of the MMA railway.”
Last month, trains began running through Lac-Mégantic again for the first time since the July 6 derailment. MM&A’s trustee, Robert Keach, said the railway and the town had come up with an agreement that restricted the types of goods that could move through the community by rail while the auction process was ongoing. However, that agreement does not extend to MM&A’s buyer, and it will be up to Fortress to determine whether it wants to transport crude through Lac-Mégantic in the future.