Irving subsidiary considering acquisition of insolvent MM&A rail line
MONTREAL - The transportation subsidiary of East Coast conglomerate Irving is keeping its options open about a possible acquisition of the railway at the centre of last month's deadly train crash in Lac-Megantic, Que., that killed 47 people.
"Basically we're looking at all of our options," J.D. Irving vice-president Mary Keith said in an interview from Maine, where the company made an announcement Monday.
J.D. Irving is the operator of the NB&M Railways, which has nearly 900 kilometres of track in Maine and New Brunswick and has been in discussion with government authorities on both sides of the border regarding the future of the Montreal, Maine and Atlantic Canada Railway.
"We're certainly keeping all of our options open as it relates to how we move forward in sustaining those rail links that are vital to, certainly the Maine economy, and also as it relates to New Brunswick and the manufacturing operations there."
However, Keith said the company has not made any offer to purchase the insolvent railway, which continues to operate while under creditor protection.
"In terms of any offer to purchase or anything like that, that has not occurred," she said.
New Brunswick Southern Railway is MM&A Canada's largest unsecured creditor after the railway's parent company.
Its claim of $2.35 million represents about half of the money owing to about 128 unsecured creditors excluding Montreal, Maine & Atlantic Railway's $43.4-million claim, according to an Aug. 14 list of unsecured creditors.
As operator of two railways in Maine and one in New Brunswick, NB&M's connections to the MMA are "vital to our operations and the customers we connect via our railroads," Keith said in an email.
The privately held company declined to disclose the financial impacts of the current situation.
In 2011, NB&M took over about 400 kilometres of track that Montreal, Maine and Atlantic abandoned in Maine. It also purchased a 45-kilometre line from MM&A in June, including a bridge that crosses into Canada with connections to the Canadian National Railway (TSX:CNR) line.
The Canadian Transportation Agency announced late Friday that Montreal, Maine and Atlantic's licence is valid until Oct. 1, reversing a move made earlier in the week.
The arm's-length federal regulator had suspended its certificate of fitness after ruling it didn't have sufficient third-party liability insurance.
That decision was overturned after the agency determined that the railway had sufficient coverage to operate in the short term.
The cash-strapped U.S. company still faces a number of financial hurdles and a company lawyer has said he expects executives to explore putting the railway up for sale within weeks.
A criminal investigation is underway, several lawsuits have been filed and the provincial government has demanded money from MMA for the massive cleanup efforts.
Canadian Pacific Railway (TSX:CP) and several companies affiliated with MMA were added to a class-action lawsuit launched on behalf of the spouse of a victim who died in the July 6 explosion as well as the owner of Musi-Cafe where most of the victims perished after the early-morning disaster.
The Calgary-based railway was added to the lawsuit because it allegedly "entrusted the transportation of highly explosive shale oil to a carrier with a poor safety reputation, which operated on railroad tracks in poor condition," stated a release from several law firms in Toronto, Montreal and the U.S.
They said the transportation of flammable and dangerous goods is limited to 10 km/hour and CPR knew MMA was insolvent and underinsured.
Also added were Union Tank Car Company, Trinity Industries and General Electric Rail Car Services Corp. (the owner of the railcars), and Western Petroleum Company (the lessor of the cars).
Canadian Pacific declined comment Monday, but last week said it held no financial responsibility for the Lac-Megantic rail disaster and rejected a demand by the Quebec government that it help pay for the cleanup in the devastated town.
The railway said it would appeal the province's legal order that added the railway to a list of defendants that it claims are responsible for paying for the massive cleanup in Lac-Megantic that is expected to top $200 million.
On July 6, an unmanned train, with 72 tankers of crude oil, came loose, derailed and crashed into the centre of Lac-Megantic near the Maine border in eastern Quebec. Several tankers exploded, destroying 40 buildings. An estimated 1.48 million gallons (5.6 million litres) of oil were spilled.
The rail company was granted creditor protection on Aug. 8 after the company said it couldn't afford the cleanup and reconstruction costs involved.