Quebec railroad bids $45 million for B&A assets More offers to buy rail line expected

BANGOR – Quebec Railways Corp. has offered $45 million to purchase most of the assets of the Bangor and Aroostook Railroad, and company officials are expecting at least one more offer within the next few days.

B&A officials outlined general terms of the offer in court documents filed this week in U.S. Bankruptcy Court in Portland. The terms were part of a response to three creditors’ request to force B&A into bankruptcy court protection.

Quebec’s offer, which is being evaluated by B&A and its owner, Iron Road Railways Inc., includes $10 million to $15 million in cash at the closing of the sale, and the assumption of $30 million in B&A’s liabilities.

Under the terms, B&A would retain its general office in Hermon and collect lease payments valued at $2 million from AT&T for fiber-optic lines in an easement.

In February, B&A said it had assets of $92.8 million and debts of about $50.4 million, according to documents railroad officials filed in Maine District Court.

B&A President Frederic Yocum Jr. did not return a telephone call for comment on Quebec’s offer or on whether any other offer was received by Friday.

Last month, the creditors – companies that leased locomotives and rail cars to B&A – asked Chief Judge James B. Haines Jr. to 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.

The creditors, Helm Financial Group of San Francisco, Union Tank Car Co. of Chicago and Ebenezer Railcar of West Seneca, N.Y., collectively are owed more than $7.1 million from B&A.

In the documents filed this week, B&A claims that being put into bankruptcy protection is unnecessary because the majority of the railroad’s creditors are agreeing to wait for payments until there is a successful sale of the system. B&A, however, admits that it has not been paying some of its bills, according to court documents, but it has made some payments to Helm and the other creditors.

B&A has asked Haines either to dismiss the creditors’ request, or suspend it until after the sale is completed. Also it wants the judge to “grant [B&A] damages to the fullest extent … and other relief as is just and equitable under the circumstances.”

“While many details remain to be worked out, the [Quebec] offer is a substantial offer and will, if selected as the final offer for [B&A], provide creditors with a far better and more immediate return than they would receive in a Chapter 11 proceeding,” according to B&A’s court documents.

Curtis Kimball, a Bangor attorney representing the creditors, said Friday that he was reviewing the reasons B&A doesn’t think it should be placed in Chapter 11. Under Chapter 11, the railroad would keep operating while it reorganized its finances and pursued a buyer. The bankruptcy court, however, would oversee any financial transaction.

Ordinarily, attorneys for B&A and the creditors would prepare for a trial on the involuntary bankruptcy petition.

In new court documents being filed by the creditors, Judge Haines is being asked to rule in their favor because the evidence shows that B&A is not paying its bills, Kimball said.

A hearing on that request is scheduled for Oct. 2.

Late last month, the creditors asked Haines to oversee all possible sales of B&A even before there is a ruling on whether B&A should be in bankruptcy protection. Haines said no, calling the request unnecessary.

Quebec works closely with Canadian National Railway, and operates approximately 900 miles of railway in New Brunswick, Quebec and Ontario.

The B&A Railroad System includes Canadian American, Quebec Southern and Northern Vermont railroads, as well as Logistics Management Systems.