On Wednesday August 7, the railway filed for Chapter 11 bankruptcy protection in the USA and simultaneously filed for relief from credits in Quebec provincial court. They disclosed the following:
- their Canadian liability insurance (through XL Insurance) does not exceed $25 million;
- their Canadian net worth is about $18 million;
- their gross revenues have declined from about $3 million/month to $1 million/month post-accident; and
- expected cleanup costs are expected to exceed $200 million, much greater than the value of the insurance plus the value of the company.
However, another blow was struck on Tuesday August 13 when the Canadian Transportation Agency revoked the MMA's license to operate due to a lack of liability insurance. This is an obvious step, since their liability insurance will be fully committed to the Lac-Mégantic cleanup and they're not going to be able to get more insurance. The railway has until August 20 to wind down its Canadian operations. The Agency is going to review other federally regulated railways.
This marks the second time that rail line's owner has gone bankrupt, since Iron Road Railways went bankrupt in 2002.