BANGOR – The proposed $62 million sale of Bangor and Aroostook System is in question after the railroad and the buyer failed to sign a formal purchase agreement by a Nov. 19 deadline established by a bankruptcy court judge last month. Now creditors who had temporarily halted their push to place the railroad in involuntary bankruptcy while sale negotiations were under way have renewed their efforts.

If the sale does go through, interested buyer Rail World Inc. of Chicago expects to eliminate about 120 of the company’s current 420 positions, according to railroad and union officials.

Also with the new owners will come a new name. Out will go Bangor and Aroostook, which has graced rail cars for more than 100 years. In will come Montreal, Maine and Atlantic railroad.

Late Monday, attorneys for the creditors asked a U.S. Bankruptcy Court judge to place the railroad system in Chapter 13 protection because it failed to meet the terms of a deal the judge approved on Oct. 30.

In the deal worked out with creditors, B&A agreed to achieve several benchmarks during its negotiations with Rail World that would have kept the Maine-based rail system out of bankruptcy. One of them was for both B&A and Rail World to sign a formal purchase agreement by Nov. 19.

The deal came after three of B&A’s creditors, who collectively are owed more than $7 million, filed a request in July with the U.S. Bankruptcy Court in Portland to have B&A involuntarily placed into bankruptcy. Chief Judge James B. Haines Jr. approved the deal.

The creditors, Helm Financial Group of San Francisco, Union Tank Car Co. of Chicago, and Ebenezer Railcar of West Seneca, N.Y., had leased B&A rail cars and tankers. Helm alone is owed $5.6 million.

Under the October deal, terms of how all of B&A’s creditors were to be paid were worked out. Secured creditors were to be paid in full within 15 days after the sale of the railroad system was closed, while other creditors were to be paid at least 50 cents on the dollar, according to court documents.

Because the formal purchase agreement was not signed by Nov. 19, attorneys for the creditors filed a “notice of default” with the bankruptcy court late Monday stating that B&A did not meet the terms of the agreement and that it should be placed into Chapter 13.

Curtis Kimball, a Bangor attorney representing the creditors, did not return telephone calls for comment.

B&A has the option to fight the default notice within three days of its filing, said president Frederic Yocum Jr. on Tuesday. But he said he is recommending to Edward Burkhardt, founder of Rail World, that they don’t do that.

“We really have no grounds to fight it,” Yocum said.

The sale will go through regardless of whether B&A is under Chapter 13 protection, Yocum said. It just will take a while longer for that to happen because a court-appointed trustee to represent creditors will now have to be involved in the process, he said.

On Oct. 4, B&A announced that Rail World was purchasing most of the system’s rail properties for $62 million. Included in the sale would be the stock of Quebec Southern Railway Co. Ltd., and the operating assets of B&A Railroad Co., the Canadian American Railroad Co., the Van Buren Bridge Co., Logistics Management Systems Inc., the Northern Vermont Railroad Co. Inc., and most of the Newport & Richford Railroad Co.

B&A and Rail World did not sign the formal purchase agreement because both companies still are working out the actual structure of the deal and the timing of its conclusion, Yocum said. For months, Yocum has publicly stated that the deal would be completed by Dec. 31.

“At this point, it’s not going to go through by Dec. 31,” he said, noting that Burkhardt has set Feb. 28 as the new targeted closing date.

In the meantime, Rail World, using the rail system’s new name of Montreal, Maine and Atlantic, has issued notices to current B&A employees that they will have to apply for the positions they now have. Because of the way the purchase agreement is being structured, Rail World is buying B&A’s assets and not its operations, Yocum said.

“It’s basically a new business,” he said.

In the notices, MMA has specified how many positions will be open in different areas of the rail system. B&A employees are the only ones allowed to apply for those jobs at this time, Yocum said.

“MMA has said they will give preference to B&A’s employees,” he said. “They have not interviewed anybody other than that.”

One union official, who represents about 130 people within B&A System, said his organization has added up the number of employees that MMA will hire, and that amounts to approximately 300 – a loss of 120 positions when compared to the current payroll.

“If this new railroad ever manifests itself, it will have less employees,” said Mike Maloff, New England general chairman for the United Transportation Union. “At least that’s what they’re telling us.”

UTU currently has a contract with B&A, but no discussions have taken place with MMA to get a contract in place for when the new operations start up, Maloff said.

“We have to find out if they’re actually going to be able to buy this railroad,” he said. “The railroad isn’t sold yet.”

Burkhardt, founder of Rail World, was out of the country and did not return telephone calls for comment.

Some employees are concerned about the structure of the sale if it does go through. One worker, who did not want to be identified, said he wishes B&A would have laid him off because he may have been offered a severance package.

He said the railroad system won’t be ceasing operations, but that on a particular day, the name will simply change and some people will be working, while others won’t.

Because of the change in operators, Rail World has decided to change the name of the rail lines to Montreal, Maine and Atlantic. For more than 100 years, Bangor and Aroostook System has been a national standard for rail transportation in New England. Yocum said Rail World believes the new name better fits the entire region the lines travel through.

Although he understands it, Yocum said it doesn’t mean he likes it.

“I personally am saddened to see it go,” he said.