Case Study

Montreal, Maine & Atlantic Railway (“MMA”)

CLIENT: Montreal, Maine & Atlantic Railway ("MMA")

Gordian Group acted as Investment Banker to lead the fast-paced §363 auction process for MMA’s assets.

Business Profiles

Situation

On July 6, 2013, an unmanned eastbound Montreal, Maine & Atlantic Railway, Ltd. (“MMA”) train with 72 carloads of crude oil and 5 locomotive units derailed in Lac-Mégantic, Quebec. The derailment set off several massive explosions which destroyed part of downtown Lac-Mégantic, and is presumed to have killed 47 people. In anticipation of accident-related liabilities, MMA was forced to file for Chapter 11 bankruptcy protection in August of 2013.  On September 4, 2013, the US and Canadian courts adopted the Cross-Border Insolvency Protocol, which ensured that both bankruptcy proceedings would operate in concert with each other.

Engagement

On October 7, 2013, the courts approved the retention of Gordian Group as Investment Banker to lead the fast-paced §363 auction process for MMA’s assets.

Outcome

Gordian ran an exhaustive outreach program, contacting in excess of 100 potential strategic and financial buyers.  In the face of strong political headwinds and regulatory uncertainty, Gordian was able to sign 25 buyers to non-disclosure agreements and, in December of 2013, secured Fortress Investment Group as Stalking-Horse for the auction process. Despite additional oil derailments in North America and continued social and political pressures throughout the process, Gordian continued to keep prospective buyers interested and at the table.

As described by Trustee Robert J. Keach, Esq., the auction process faced “probably the most difficult sales environment I’ve ever encountered in 34 years of practice. It was not only a challenge to bring other people into the party but a challenge frankly to keep the parties who were there in play when you consider that there were 5 separate derailments and explosions on other railroads during the period of time when we were trying to sell these assets. So it was a challenging process, they (Gordian) not only performed the services of which they were contracted, but performed admirably…”

While most buyers saw little to no value in MMA’s assets, Fortress Investment Group emerged as the successful bidder, bidding $15.85 million for the railroad.  The transaction closed in June of 2014.