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.
1 comment:
In the early 1990's, I was asked to advise a funder to a potential purchaser of the CP lines east of Montreal. My comments at the time is that I found that the number of employees per mile was too high to make a satisfactory rate of return.
When I was asked what I would do, I would recommend a complete changeout of the stick rail to heavier weight CWR and add about 1000 new ties per mile. This would keep better line as well as allow the heavier cars to move at greater speed thus reducing the number of employees per mile.
It this were done from St Jean, QC through to Saint John, NB, it would have opened up the latter as being a bypass container port for Halifax. By diversifying the shipper base, the railway would have withstood the 2008 housing market crash. Also, there would have been a more comfortable and faster VIA dayliner service.
I suspect that the MM&A is toast. The successor will see the same operational issues and will not fare any better unless they materially upgrade the line. Some more modern locos would help as well.
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