Bankruptcy judges in Quebec and Maine have approved the sale of the insolvent railway MM&A involved in last summer's deadly accident in Lac-Mégantic, Que., that claimed 47 lives.
Railroad Acquisition Holdings LLC, an affiliate of New York-based Fortress Investment Group, will pay $16.85 million US for the entire network in both countries, according to U.S. bankruptcy trustee Robert Keach.
The winning bidder had also served as the "stalking horse" bidder, setting a minimum bid for the MM&A's assets.
Montreal, Maine and Atlantic Railway operates about 770 kilometres of track in Maine, Vermont and Quebec.
Proceeds from the sale and a $25-million insurance policy will be used to pay creditors and victims of the disaster.
The transaction is expected to close by March 14, but could be extended by two months to obtain regulatory approval in Canada and the United States.
40 Potential bidders jumped on sale
XL Insurance Company says it won't renew the railway's policy when it expires April 1, although the trustee is negotiating an extension, according to an update to the Quebec Superior Court. The Canadian Transportation Agency requires insurance coverage before it will grant an operating licence.
More than 40 potential bidders expressed an interest in buying all or parts of the railway, but only 18 signed confidentiality agreements to gain access to internal financial numbers. Some bidders were initially interested in some operations but only Railroad Acquisition Holdings ultimately wanted the entire network.
The Quebec-appointed monitor, Richter Advisory Group, recommended approval of the sale.
"The offer is for all of the assets and will result in the continued operation of railroads in both Canada and the United States, which is in the public interest," it wrote in a Jan. 22 report to the court.
Richter said the sale allows for the majority of employees in Canada to keep their jobs and that the offer was "beneficial" to the economic development of the communities along the railway.
Fortress is a global investment management firm that acts on behalf of more than 1,500 institutional investors and private clients around the world.