B&A: Creditors’ bankruptcy move unnecessary

BANGOR – Calling the action unnecessary, Bangor and Aroostook Railroad System is opposing a creditor’s attempt to have all possible sales of railroad property reviewed by a bankruptcy court judge.

A B&A attorney said the creditor already has liens on all property owned by the railroad and would have to sign off on any sales. Having a bankruptcy court judge involved in the process would “unduly burden B&A” and “add additional expense and additional possible delay” in any transactions, wrote Keith Cunningham, an attorney for B&A, in court documents filed Thursday.

“If somebody proposes a sale, they would decide if they want to participate in how the property is sold,” Cunningham said Thursday evening.

Last week, three creditors filed a petition in U.S. Bankruptcy Court in Portland asking Judge James B. Haines to place B&A under Chapter 11 bankruptcy protection. The primary purpose of their action was to have the court oversee the railroad’s books and examine any sales or lease transactions to ensure that they are in the best interest of creditors and the public.

A railroad only can file or be placed under Chapter 11 reorganization. It cannot file Chapter 7 bankruptcy, which would require the railroad to cease operations. Under bankruptcy law, Congress said railroads need to keep operating to move goods for public use.

On Tuesday, one of the creditors, Helm Financial Group of San Francisco, which is owed more than $5.7 million by B&A, requested that Haines oversee any sales by the railroad before he decides whether to put B&A in bankruptcy.

It’s an unusual request because a judge doesn’t normally scrutinize financial transactions, including sales or leases, until a company actually is under Chapter 11.

A B&A official on Wednesday acknowledged that the rail system and operations probably will be sold in pieces and not as one entity to one group.

Helm and the other two creditors, Union Tank Car Co. of Chicago and Ebenezer Railcar of West Seneca, N.Y., are owed a total of more than $7.1 million in lease payments on locomotives and railcars.

Cunningham said B&A has admitted in the past to having liquidation problems, and that’s why the three creditors have not received any money.

“It’s been cash-flow problems and cash-flow problems arise from a number of factors,” he said.

In February, B&A said it had assets of $92.8 million and debts of about $50.4 million. Cunningham said it’s common for a railroad to have more assets than debts, but most of the assets aren’t easily sellable.

Judge Haines will review Helm’s motion for him to oversee any sales transactions in a hearing Tuesday afternoon.

Helm’s attorney, Curtis Kimball, was not available for comment Thursday evening.

B&A Railroad System is owned by Iron Road Railways of Virginia. Besides Bangor and Aroostook Railroad, the system includes Canadian American, Quebec Southern and Northern Vermont railroads, as well as Logistics Management Systems.