Beleaguered MM&A files for bankruptcy

Montreal, Maine & Atlantic Railway (MM&A), operator of the runaway crude oil train involved in the July 6 derailment and explosion at Lac-Mégantic, Quebec, that killed 47 people, announced on Wednesday, Aug. 7 that it has filed for bankruptcy in the U.S. and Canada.

MM&A filed for Chapter 11 bankruptcy reorganization in U.S. Bankruptcy Court in Bangor, Me. An affiliated company, Montreal, Maine & Atlantic Canada Co., filed a petition in Quebec Superior Court in Montreal, Canada, under the country’s Companies’ Creditors Arrangement Act.

“It has become apparent that the obligations of MM&A now exceed the value of its assets, including prospective insurance recoveries, as a direct result of the tragic derailment at Lac-Mégantic,” said MM&A and parent company Rail World Chairman Ed Burkhardt (pictured). Bankruptcy is “the best way to ensure fairness of treatment to all in these tragic circumstances.” He said the railroad will continue to work with the Québec Ministry of the Environment, the municipality of Lac-Mégantic, and other government authorities “on environmental remediation and cleanup as long as is necessary, and will do everything within our capacity to achieve completion of such a goal. The people of Lac-Mégantic have suffered a great deal over the past month. We are joined in sorrow, a sorrow that will remain a part of me for the rest of my life.”

Burkhardt (in photo at left) said that essential MM&A service on all of the railroad’s lines in Québec, Maine, and Vermont, with the exception of Lac-Mégantic itself, will continue during the bankruptcy proceedings. Service to industries at Lac-Mégantic could be restored as soon as local authorities give the railroad the go-ahead to resume operations “to the level they consider appropriate.” However, MM&A has ceased carrying crude oil.

A criminal investigation into the accident is currently under way in Quebec, and the town of Lac-Mégantic is seeking financial assistance to rebuild the area devastated by the explosion. Lac-Mégantic Mayor Collette Roy-Laroche said the municipality has paid about $7.7 million to eight MM&A-hired contractors to clean up the spilled crude because the railroad has not paid for the work. Court documents estimate the Lac-Mégantic cleanup cost at $200 million. MM&A said in its court petition that it has $25 million in insurance coverage.

MM&A, along with Burkhardt and several fuel companies, was sued July 22 in state court in Chicago over the accident. Western Petroleum Co. of Eden Prairie, Minn., and Miami, Fla.-based World Fuel Services Corp. own the crude spilled at Lac-Mégantic. About 1.5 million gallons of crude spilled from the damaged railcars, according to the Québec Ministry of the Environment. The 73-car MM&A train was carrying about 1.9 million gallons of crude at the time of the derailment. The accident, according to a Bloomberg News report, “was Canada’s worst rail disaster since 1910.”

The bankruptcy case is: In re Montreal Maine & Atlantic Railway, 1:13-bk-10670, U.S. Bankruptcy Court, District of Maine (Bangor). The lawsuit is: Roy v. Montreal Maine & Atlantic Railway, 2013-LOO8272, Circuit Court of Cook County, Illinois (Chicago). According to court papers, the U.S. government is among the MM&A’s creditors, with the railroad owing $27.5 million under a Federal Railroad Administration RRIF (Railroad Rehabilitation & Improvement Financing) loan.

MM&A operates a 510-mile network stretching from Montreal in the west to Bangor and Searsport on Maine’s Atlantic coast, with branches to Newport, Vt., and Millinocket, Me. The railroad employs 85. Rail World is a regional and short line operator based in Rosemont, Ill. The company formed MM&A after buying the assets of bankrupt Bangor & Aroostook Railroad Co. in early 2003.