Media Archive

Buyer makes offer for B&A assets

Article from The Piscataquis Observer, Vol. 164, No. 15, April 10, 2002

By Sarah MacIlroy
Staff Writer

MILO There may be some light at the end of the tunnel for the Bangor and Aroostook Railroad.

After a meeting with Trustee James Howard, Milo Town Manager Jane Jones reported that a purchase and sale agreement of the assets of the railroad is in the pipeline.

As of last week, Howard said the purchase and sale agreement with The Burkhart Group, also known as Rail World, Inc., had not been signed.

"I thought it would be signed about a month ago," he said, "but we're still trying. Hopefully, it will be signed within the next few weeks - If we do sign it, we'll ask the court for Ihe approval to go ahead and implement it,"

Jones said that although the actual amount of the group's offer has not been reported to Jones, but she said she knows the buyer is not proposing to pay full asking price. "All I do know is that their offer isn't- the $60 million," Jones explained at a selectmen's meeting last week.

Jones said the amount owed to secured creditors is about $48 million which would indicate that the offer must be at least that amount.

"As a secured creditor, we're in a position to see the purchase and sale agreement since it is a matter of public record," Jones explained. "I am very eager to see the actual terms involved."

One of the positive aspects of the potential sale is that the B&A maintenance facilities in Derby are part of the proposed sale package.

"The trustee said that the Derby shops are included in sale." she said. "And he (the trustee) has secured a line of credit that will keep the railroad running until the end of the year if the purchase and sale agreement doesn't go through."

Jones seemed to indicate that this was a positive sign because it meant that Howard wanted to see the railroad on the road to recovery as soon as possible.

The purchase and sale agreement must be accompanied by part of the sale price. However, Jones explained that there is a window of time after the purchase and sale agreement when other interested parties can see the selling price and have the opportunity to make better offers.

"The trustee explained that the idea was that during that time there is an opportunity for other potential buyers to up the ante," she said.

"However, in the end... only the (federal bankruptcy) judge can sign the final agreement and say this is something that the court agrees to."

Howard said keeping the sale open to higher offers is typical of bankruptcy proceedings.

"That's pan of the bankruptcy process," he said. "We would file that agreement (the purchase and sale) with the court so interested parties would know what the price is and make higher offers if they want to."

There are reportedly several other businesses interested in buying the railroad. Jones said she believes that one of the other interested parties is Genesee and Wyoming, Inc.. the company who toured the area late last year.

"At least three others have expressed interest and we'll see what kind of offer they may or may not want to make," she said.

If the Burkhart Group sale goes through, it could be finished up by early summer if all goes well. "This thing is complicated," Jones said. "Every time we think we have a handle on it something new comes up."

The total debt of the Bangor and Aroostook Railroad is about $128 million dollars. With $48 million in secured credit, that leaves about $80 million in unsecured debt, some of which is owned to local businesses.

"It's the little guys thai are going to lose in this," predicted Milo Selectmen Rick Gallagher.

It is not just the Bangor and Aroostook Railroad that is going into bankruptcy, however. Connected lines, like the Canadian-American Railway (CDAC), the Quebec Southern, Vermont Northern could be facing the same process in the near future, if they aren't already.

"The Quebec Southern is proceeding (with a similar bankruptcy process) in Canada," Howard said."It's possible that the others would be put into bankruptcy as part of a sale."

Forcing the other lines into bankruptcy may just be part of the system, he said.

"We're trying to sell a whole system," he explained, "which includes four railroads: Bangor and Aroostook, CDAC, Quebec Southern and Vermont Norlhern. To facilitate a sale of the four railroads as part of one system&Mac247;if we signed an agreement with RailWorld&Mac247;the others may have to be put into bankruptcy so the bankruptcy court would have jurisdiction over the entire system."

How much time that would add to the sale process, if any, Howard wasn't sure. However, keeping the railroad intact is something that communities like Milo might not mind waiting for.

"You need all the pieces to hold the whole system together," Jones explained. "The CDAC has to function as part of it or... the (other lines') are railroads to nowhere. My guess is that the trustee will come to some sort of agreement to force the other two into involuntary bankruptcy in order to put them all together as one package."

NOTE - This article reflects the views of the author and not necessarily those of the TRC Alliance Team.