CENTRAL MAINE & QUEBEC RAILWAY (CMQ) — New Owner of MMA

Discussion of present-day CM&Q operations, as well as discussion of predecessors Montreal, Maine & Atlantic Railway (MMA) and Bangor & Aroostook Railroad (BAR).

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CENTRAL MAINE & QUEBEC RAILWAY (CMQ) — New Owner of MMA

Postby railfan60 » Tue Jan 21, 2014 1:39 pm

The news just came out in the Montreal's french language newspaper ``La Presse``


Railroad Acquisition Holdings LLC, an affiliate of Fortress Investment Group, will become the owner of the business at the heart of the tragedy of Lac-Mégantic, two sources confirm.


http://www.lapresse.ca/actualites/dossi ... la-mma.php



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Re: Railroad Acquisition Holdings LLC

Postby CPF363 » Tue Jan 21, 2014 7:43 pm

Lets all hope for the best for Railroad Acquisition Holdings LLC purchase of MM&A routes. After all, this is the third owner of this route since CP sold it in the 1990s coming behind Iron Roads and Rail One. Hopefully, the courts in both the United States and Canada will bring the bankruptcy to a close in the March or April time frame.

If this acquisition is indeed approved, where does everyone see this system in a year or five years? Fortress has the money to invest into the railroad, the property is coming at a very inexpensive price for them and they have the money to invest into the railroad also. A new name, completely different from MM&A will be adopted for the line in addition to agreements with employees. Will Railroad Acquisition Holdings operate the system themselves or will they have another entity such as the VTR, NBSR/EMRY, ST or the SLR operate the system for them? To get confidence of existing customers while simultaneously marketing to new ones, track improvements will have to be made to get speeds up and train schedules established. Will MM&A's locomotives suffice or will new power be required? Could high priority traffic such as TOFC and Auto traffic come back to the line that could be bound for Maine and Quebec customers but also to steamship lines. Will Irving decide to send more of their freight to the line from the east away from routing via the CN and over the Maine Central? How will Vermont trackage work into the system and their interchange with the VTR? Certainly going to be interesting to watch how all of this unfolds over the next months and years.
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Re: Railroad Acquisition Holdings LLC

Postby charlie6017 » Tue Jan 21, 2014 7:58 pm

I'm no financial wizard and never have heard of Railroad Acquisition Holdings LLC before,
so I'm wondering---are they intent on continued railroad operations if MMA or are they simply
looking to liquidate and sell off the assets?

Just wondering what your thoughts are or if anyone has any knowledge whatsoever that could
be shared?

Thanks,
Charlie
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Re: Railroad Acquisition Holdings LLC

Postby Dick H » Tue Jan 21, 2014 9:09 pm

According to the article in the Portland Press Herald,
reference in the "What's Next for MMA" thread, it is
the Fortress Investment Group LLC that is putting up
the money. They owned Rail America at one time.
Railroad Acquistion Holdings LLC is supposedly part
of Fortress.

Wiki page on Fortress has this quote:
"During the RailAmerica ownership, railfans criticized both RailAmerica and Fortress Investment Group for an increased number of abandonments on several shortlines. The most notorious example, the Central Oregon and Pacific's Coos Bay line, is saved from abandonment unlike other lines."

Full page on Fortress here:
http://en.wikipedia.org/wiki/Fortress_Investment_Group
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Re: Railroad Acquisition Holdings LLC

Postby charlie6017 » Tue Jan 21, 2014 9:51 pm

According to the article in the Portland Press Herald,
reference in the "What's Next for MMA" thread, it is
the Fortress Investment Group LLC that is putting up
the money. They owned Rail America at one time.
Railroad Acquistion Holdings LLC is supposedly part
of Fortress.

Wiki page on Fortress has this quote:
"During the RailAmerica ownership, railfans criticized both RailAmerica and Fortress Investment Group for an increased number of abandonments on several shortlines. The most notorious example, the Central Oregon and Pacific's Coos Bay line, is saved from abandonment unlike other lines."

Full page on Fortress here:
http://en.wikipedia.org/wiki/Fortress_Investment_Group


Okay...........so I'll substitute Fortress Investment Group LLC for Railroad Acquisition Holdings LLC and ask again.........

I'm no financial wizard and never have heard of Fortress Investment Group LLC before,
so I'm wondering---are they intent on continued railroad operations if MMA or are they simply
looking to liquidate and sell off the assets?

Just wondering what your thoughts are or if anyone has any knowledge whatsoever that could
be shared?

Thanks,
Charlie
~Charlie Ricker
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Re: Railroad Acquisition Holdings LLC

Postby CN9634 » Tue Jan 21, 2014 10:25 pm

They fully intend to operate the railroad. From the sounds of it, VRS got the Newport sub as well. Too bad the joint PAR/EMRY bid did not get approved but they only tried to get the Maine lot...
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Re: What's next for MMA?

Postby Gilbert B Norman » Wed Jan 22, 2014 8:44 am

Gents, before anyone signs up for the Fortress cheerleading squad, I would suggest a review of Fortress' acquisition of Florida East Coast. Painting with very broad strokes, Fortress acquired FEC by means of a leveraged buyout. Very simply, that means the 'target' (FEC) has hocked itself so the 'shooter' (Fortress) can enjoy ownership of the 'target' committing very little of its own cash. Another way of viewing such a transaction is that what once was Shareholder Equity has now become Long Term Debt - with an addition to pay the inevitable premium over pre-existing 'Market Cap' to effect the deal.

As a result, the well-run FEC, while still making a buck from railroad operations, is not making enough bucks to cover the debt service (interest and required principal payments) that arose from the leveraged buyout. This is why, as I have noticed here at other Forums as well as at my own blog, that I am quite skeptical of the All Aboard Florida initiative to run passenger trains over the FEC without any public funding.

But lest we forget, passenger trains create visibility - both on Main Street and in Tallahassee, and if the FEC is to be sold to a public agency as a bailout, then the thought of passenger trains will create public interest with 'John Q' - and the last time I checked, Corporations, even if often referred to as 'persons', have not yet attained the right to vote.

If you ask me, it's time for a 'White Knight' to ride to the rescue.
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Re: Railroad Acquisition Holdings LLC

Postby newpylong » Wed Jan 22, 2014 8:52 am

They own Florida East Coast, another Class 2 so one would think they intend to operate and make money.
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Re: Railroad Acquisition Holdings LLC - New Owner of MMA

Postby MEC407 » Wed Jan 22, 2014 9:37 am

From The Portland Press Herald:

The Portland Press Herald wrote:Fortress Investment Group emerged as the winner of an auction on Tuesday for bankrupt rail carrier Montreal, Maine & Atlantic Railway, which derailed in Lac-Megantic, Quebec, killing 47 people.

According to Chop Hardenbergh, who edits the newsletter Atlantic Northeast Rails & Ports, said on Tuesday that Fortress was the victor of the 40-minute auction. The final decision will be made on Thursday by U.S. District Court in Bangor and the Superior Court of Quebec in Sherbrook, which will hold simultaneous proceedings starting at 10 a.m.
. . .
Another bidder, J.D. Irving Ltd., said its Eastern Maine Railway Co. unit had partnered with Springfield Terminal Railway Co. to submit a bid for only the Maine portions of the MM&A.

“In the end, the trustee went forward with a single buyer of the entire MMA railway line (Maine and Quebec track). We look forward to working with Fortress Investment Group of New York as they assume operation of the MMA railway,” Wayne Power, vice president of J.D. Irving’s transportation and logistics division, said in a statement.


Read the rest of the article at: http://www.pressherald.com/news/Fortres ... tion_.html
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Re: What's next for MMA?

Postby Sir Ray » Wed Jan 22, 2014 10:14 am

Gilbert B Norman wrote:Gents, before anyone signs up for the Fortress cheerleading squad

I'm not sure anyone is particularly cheering for Fortress at this point, who seemed to have first entered the picture with their "Stalking horse" bid (back on page 21 of this thread).

What I want to know is what happened to those "“multiple bids” that were reported? I guess 2 bids could be considered "multiple", but that's a bit of semantics (and one bid was only for the Maine portion, not the entire line - wasn't that against the Trustee's later amendments to the conditions of sale to keep the whole line intact?)

it's time for a 'White Knight' to ride to the rescue.
Will he be riding a Stalking Horse?
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Re: What's next for MMA?

Postby CN9634 » Wed Jan 22, 2014 12:35 pm

Fortress was chosen amongst multiple bids because they were the only one who wanted to run the system intact. Other bids were only for certain lines... essentially no one wanted to run the Moosehead.
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Re: What's next for MMA?

Postby Ridgefielder » Wed Jan 22, 2014 12:48 pm

Gilbert B Norman wrote:Gents, before anyone signs up for the Fortress cheerleading squad, I would suggest a review of Fortress' acquisition of Florida East Coast. Painting with very broad strokes, Fortress acquired FEC by means of a leveraged buyout. Very simply, that means the 'target' (FEC) has hocked itself so the 'shooter' (Fortress) can enjoy ownership of the 'target' committing very little of its own cash. Another way of viewing such a transaction is that what once was Shareholder Equity has now become Long Term Debt - with an addition to pay the inevitable premium over pre-existing 'Market Cap' to effect the deal.

As a result, the well-run FEC, while still making a buck from railroad operations, is not making enough bucks to cover the debt service (interest and required principal payments) that arose from the leveraged buyout. This is why, as I have noticed here at other Forums as well as at my own blog, that I am quite skeptical of the All Aboard Florida initiative to run passenger trains over the FEC without any public funding.

But lest we forget, passenger trains create visibility - both on Main Street and in Tallahassee, and if the FEC is to be sold to a public agency as a bailout, then the thought of passenger trains will create public interest with 'John Q' - and the last time I checked, Corporations, even if often referred to as 'persons', have not yet attained the right to vote.

If you ask me, it's time for a 'White Knight' to ride to the rescue.

Mr. Norman- I don't know about that w regard to the FEC. While Florida East Coast is a private company, the bonds are still publicly traded. The 1st lien notes (due 2/1/17, with an 8.125% coupon) changed hands at 104.5 cents/dollar to yield 1.73%. That's roughly the same yield as Ford Motor debt with a similar maturity. Moody's also has a positive credit outlook on the company. Neither that yield nor the credit rating strike me as belonging to a company that can't cover its debt service [NOTE TO EVERYONE-- THIS IS NOT INVESTMENT ADVICE!! :-D ] . Also, bear in mind that Fortress's LBO of Florida East Coast was, from an investment perspective, fantastically ill-timed: they bought the company in the summer of 2007, right before the financial crisis and ensuing recession hit. If it were that much of a money-sink they'd likely have punted the line into bankruptcy or sold it to Norfolk Southern for pennies on the dollar rather than stuck it out for what is now close on seven long years.
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Re: What's next for MMA?

Postby Gilbert B Norman » Wed Jan 22, 2014 12:59 pm

Mr. Ridgefield, the last time I saw publicly disclosed FEC Financial Statements was for 2010; at that time, there was not sufficient cash flow from the railroad to cover debt service. That means at that time, they had to dig into other resources such as from Industries or Fortress to meet debt service.

As you note, they are now deemed privately held and can 'pull the veil' so that informed prying eyes, like yours and mine, are shut out.

But MM&A is hardly another FEC insofar as an operating railroad; my cautions remain standing.
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Re: What's next for MMA?

Postby CN9634 » Wed Jan 22, 2014 1:25 pm

I'd be interested in seeing those statements myself. What types of debt did they have and what did the capital structure look like?
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Re: What's next for MMA?

Postby Ridgefielder » Wed Jan 22, 2014 4:10 pm

CN9634 wrote:I'd be interested in seeing those statements myself. What types of debt did they have and what did the capital structure look like?

According to Bloomberg they have $636mm in debt outstanding-- $161mm at the Florida East Coast Holdings Corp. level and $475mm at the Florida East Coast Railway Corp. (the operating subsidiary). Holding Co. debt is rated Caa3, the Operating Co. (which is a first lien) is rated B3. Coupon on the HoldCo debt is 10.50%, the OpCo debt is 8.125%. No idea how that compares to their cash flows etc. By comparison, Providence & Worcester reported liabilities of $26mm; on the other hand, Genessee & Wyoming has borrowings of ~$1.8 billion.
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