Apache Railway saved by last-minute purchase

The 98-year-old Apache Railway Company, a short line railroad operating in Navajo County, Ariz., announced Dec. 1, 2015 that it has been purchased by an entity formed by Aztec Land and Cattle Company Limited and related entities, in a deal that will enable the railway to see its centennial and beyond.

The three-year effort to save the Apache began after the 2012 closure of the Catalyst Paper Mill, which ultimately led to the mill and the Apache being purchased out of bankruptcy by a California investment group. Fearing that the Apache would be scrapped, concerned Navajo County leaders formed the Snowflake Community Foundation (SCF) to purchase the Apache from the investment group using short-term financing. Under SCF’s ownership over the past three years, the Apache continued operations and became profitable again.

In May 2015, SCF filed for U.S. Bankruptcy Court protection as it continued to seek permanent financing for the railway, and thereby ensure the railway would continue to be one of the region’s lifelines for jobs and economic development. The court had recently established a Nov. 30 deadline for SCF’s debt to be repaid. Last week, the court approved the sale of the Apache stock to the new ownership group. The deal, which closed Monday, Nov. 30, extinguishes SCF’s debt and related liens on Apache assets, and allows the railway to continue operations as it has for nearly the past century.

The Apache’s management will remain in place. Its workforce, which consisted of just eight employees three years ago, has increased to 21. The workforce will continue to expand to meet demand for the Apache’s rail services.

Through a collaborative local and state effort, equity investors were found to contribute significant capital to the acquisition of the railroad. The effort was complemented with a $2.5 million joint loan from the Arizona Commerce Authority’s Arizona Innovation Accelerator Fund program ($1.75 million) and Arizona MultiBank ($750,000).

In addition to the assistance of the Arizona Commerce Authority, other federal, state and local leaders have assisted the Apache during its long journey. United States Senators John McCain (R-Ariz.) and Jeff Flake (R-Ariz.), Congresswoman Ann Kirkpatrick, Governor Doug Ducey and his staff all played important roles during the last three years. Locally, the Apache was aided by the Snowflake Town Council, former Snowflake Town Manager Paul Watson (now with Navajo County), Snowflake Mayor Tom Poscharsky, and former Vice Mayor Jason Whiting (now Navajo County Supervisor). Apache customers Hormel Foods and Preferred Sands also lent key support to the effort.

“Strengthening Arizona’s rural communities is an important part of enhancing our statewide economy,” said Governor Doug Ducey. “The historic Apache Railway is a key piece of infrastructure that is vital for supporting economic development in Navajo County and its continued operation will attract industry and opportunity to the region.”

“The case of the Apache Railway demonstrates how public and private interests should work together,” said Steve Brophy, President of the Apache Railway Company. “In saving the Apache, both gave full measure so that our community might live well and prosper. A fully-functioning Apache Railway will attract new businesses, and gives Navajo County the necessary underpinnings for job growth and the resulting economic benefit for the entire community, now and into the future.”

“The Apache is such a tremendous asset to our community,” said Navajo County Supervisor Jason Whiting. “It provides Navajo County and the Town of Snowflake a connection to other markets, increasing our ability to better do business throughout the southwest. For economic development purposes, the more assets a community has, the better chance it will attract meaningful investment, and the jobs that go with it.”

“The ACA remains committed to supporting local communities throughout Arizona and is proud of our work to ensure the Apache Railway’s continued success,” said Sandra Watson, Arizona Commerce Authority President & CEO. “The Apache provides a foundation for bringing jobs and economic opportunity to Navajo County. The successful effort to secure new financing for the railway is an excellent example of collaboration between public and private sector entities to ensure the longevity of an important piece of infrastructure.”

“The Apache Railway has used up another one of its nine lives and we are glad it is still serving the economic development of our community and Navajo County,” said Town of Snowflake Mayor Tom Poscharsky.